U.S. economy grew at faster-than-expected rate in second quarter

August 29, 2012

While the initial projections had the U.S. growing at a slightly slower rate during the second quarter, the upward adjustments of this measure have garnered mixed reactions from economists as to the significance of this slight fix.

Though the increase in the growth numbers from the Commerce Department may have only a slight impact on the overall confidence that consumers have in the economy, U.S. manufacturing would benefit from any rise in activity or spending.

The Commerce Department announced that it had adjusted its initial estimate of 1.5 percent growth to expansion of 1.7 percent during the second quarter.

According to The Associated Press, this report did little to boost the sentiment of some economists, especially since it fell when compared to the rate of growth for the first quarter, and has more than halved since Q4 2011.

Economists are not raising their projections for the second half of 2012, but some have noted that the Q2 numbers may be slightly lower than the 2 percent that has been estimated for the third quarter.

"The economy was sluggish in the second quarter and the slight upward revision…does nothing to change that picture," said John Ryding, an economist at RDQ Economics, in a note to clients.

The Federal Reserve noted that business activity is beginning to pick up slightly after a period of stagnation, according to Reuters.

"Reports from the twelve Federal Reserve districts suggest economic activity continued to expand gradually in July and early August across most regions and sectors," the Beige Book said.

While the overall economy was adjusted upward by the Commerce Department and the Fed, the manufacturing activity around the country continued to slow during the past several months.

Though the Fed noticed that manufacturing growth was slowing in several key districts around the country, this is likely linked to a drop in demand caused by the overall global economy rather than the business strategy of American firms.

"Many districts reported some softening in manufacturing, either a slowdown in the rate of growth or a decline in the level of sales, output or orders," the Fed said, according to Reuters. "Across the districts, few manufacturing firms reported any major hiring or layoffs."