WASHINGTON — The U.S. economy is gaining momentum and is poised for a stronger recovery later this year, according to new data Wednesday from the Commerce Department. The numbers also showed that 2012 was stronger than had been estimated.
Most mainstream economists had expected a second-quarter growth number below 1 percent, so the report from the Bureau of Economic Analysis showing an annual growth rate of 1.7 percent from April to June provided a positive surprise. It followed a private gauge of hiring called the ADP National Employment Report, which came in stronger than expected, with 200,000 new private-sector jobs in July over June.
The government also revised its growth figures going back five years, incorporating new data to find that the U.S. economy was stronger in 2012 than had been estimated earlier and the Great Recession wasn’t as deep as had been thought.
For all those upbeat factors, the Commerce Department also revised downward its estimate for growth from this January through March, to just 1.1 percent from its earlier estimate of 1.8 percent.
It means that for the first half of the year, the economy lumbered along at an anemic annual growth rate of 1.4 percent. Over the past three quarters, the economy has grown at an annual rate of just 0.6 percent.
“Growth was a bit stronger than anticipated in the second quarter, but has come to a virtual standstill since late last year. The tax increases and government spending cuts have weighed,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “Despite the weak numbers, employment growth is holding up.”
The conflicting signs in the government data led the Federal Reserve to disappoint with a much-anticipated statement Wednesday at the close of its two-day meeting. Fed policymakers avoided committing to a timetable for ending controversial bond purchases of $85 billion a month, designed to provide an unconventional economic stimulus.
In its vague statement, the Fed said it “will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.”
A continued rebound in the housing sector was the biggest plus in Wednesday’s report. That might boost things in the months ahead.
“Residential real estate continues to do its thing, rising 13.4 percent (in the second quarter) after a 12.5 percent jump” in the first quarter, Neil Dutta, the head of U.S. economics for Renaissance Macro Research, wrote in a note to investors. “With single-family building permits climbing and much of the new homes sold not yet started, we suspect construction activity to accelerate” in the second half of the year.
Adding to the intrigue Wednesday, the government released a comprehensive revision of economic data that showed that the Great Recession wasn’t as steep as earlier estimates had suggested and that the recovery has been a bit stronger than advertised.
Over the 18 months of the Great Recession, the real economic growth rate contracted at an annual rate of 2.9 percent, not the 3.2 percent estimated earlier. The cumulative rate of contraction was 4.3 percent, not the previously published rate of 4.7 percent.
“The revisions do not change the underlying narrative,” Dutta said. “This has been a slow recovery from a deep recession.”
Similarly, the expansion since the end of the Great Recession until the end of 2012 brought an annualized growth rate of 2.3 percent, better than the earlier estimate of 2.1 percent. And from the final four months of 2011 to the end of 2012, the economy grew at an annual rate of 2 percent, not the previously published estimate of 1.7 percent.