July 30, 2014 8:35 AM, EDT

Economy Grows in Second Quarter as Consumer Spending Rises


Gains in consumer spending and business investment helped the U.S. economy rebound more than forecast in the second quarter following a slump in the prior three months that was smaller than previously estimated.

Gross domestic product rose at a 4% annualized rate, the most since the third quarter of 2013, after shrinking 2.1% from January through March, Commerce Department figures showed.

The median forecast of 80 economists surveyed by Bloomberg News called for a 3% advance. Consumer spending, the biggest part of the economy, rose 2.5%, reflecting the biggest gain in purchases of durable goods such as autos in almost five years.

“The economy is looking pretty darned good,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. “The momentum for the second half is solid. The labor market is driving this growth, which means companies are looking for workers. The big picture looks a lot brighter and is probably more accurate” than the first-quarter GDP reading suggests.

The first-quarter reading was revised up from a previously reported 2.9% drop.

The GDP figures are the first of three for the quarter, with the other releases scheduled for August and September when more information becomes available.

The increase in household consumption, which accounts for almost 70% of the economy, exceeded the 1.9% median forecast of economists surveyed by Bloomberg and followed a 1.2% advance in the first three months of 2014. Purchases added 1.7 percentage points to growth.

Purchases of durable goods, including autos, furniture and appliances and recreational vehicles, jumped at a 14% annualized rate, the most since the third quarter of 2009, when the recovery began.