Exports Drive Surprising Economic Growth
Friday, August 29, 2008
U.S. economic growth accelerated from April to June as taxpayers spent their federal rebate checks and a weakened dollar boosted exports, the government reported yesterday.
According to new data from the Commerce Department, gross domestic product grew at an annualized rate of 3.3 percent in the second quarter of the year, the fastest rate since mid-2007. The department had initially estimated annualized growth for the period to be 1.9 percent, but more complete data -- particularly on exports by U.S. companies -- showed the economy to be growing faster.
The new data helped send U.S. stocks sharply higher and offered a respite from a period of sluggish growth. GDP shrank in the last three months of 2007 and grew at an annual rate of less than 1 percent from January to March this year.
Whether that pace of growth continues, however, is another issue.
Taxpayers in May and June, for example, received more than $100 billion in rebates from the federal government. That money helped boost consumer spending compared with the previous quarter -- but won't be available to sustain it going forward.
A recent recovery in the value of the dollar, meanwhile, and slowing growth abroad could temper what has been a rapid rise in exports. They have been a key support for a U.S. economy buffeted by falling real estate values and a financial crisis that has spread from brokerage firms to include banks and mainstay companies such as the mortgage giant Fannie Mae.
Sales abroad jumped by 13 percent from April through June and accounted for most of the growth in second-quarter GDP.
White House spokeswoman Dana Perino told reporters yesterday that the strong growth in exports "demonstrates just how important it is to continue with President Bush's efforts to open markets for America's goods and services." She called on Congress to pass a trade agreement with Colombia and other such negotiated agreements when lawmakers return from their summer recess on Sept. 8.
Asked whether the White House felt any vindication from yesterday's numbers, Perino said that "no one's doing a victory dance, but what we are doing is making sure that we continue to press Congress on one of the most important aspects, which is free trade."
While the overall GDP figure "looks good," the economy was nearly stagnant when exports are factored out, wrote Ian Shepherdson, chief U.S. economist with the consulting firm High Frequency Economics. "We expect much weaker" growth in the last half of the year, he said.
The Dow Jones industrial average rose yesterday by 212.67, or 1.85 percent, to close at 11,715.18. The Standard & Poor's 500-stock index gained 19.02, or 1.48 percent, to 1300.68, while the tech-heavy Nasdaq composite index finished at 2411.64, up 29.18, or 1.22 percent.
The stock market was also cheered by a Labor Department report that the number of newly jobless people seeking unemployment benefits fell for the third week in a row.
Gross domestic product is a broad measure of the goods and services produced by U.S. businesses and workers and is one of the statistics most closely watched in recent months amid fears that the economy is slipping into recession.
The stronger-than-expected GDP showing comes on the heels of a positive report this week on sales of long-lasting products, or durable goods, and modestly optimistic news on home sales.
But rising inflation remains a concern, as do a string of monthly job losses this year that have pushed unemployment higher and raised concerns about weak consumer spending in the future.