The U.S. economy's soft patch last spring was a bit firmer than previously thought.
The gross domestic product, the broadest measure of economic output, grew at a 3.3 percent annual rate in the second quarter, the Commerce Department reported yesterday, revising its earlier estimate of 2.8 percent.
The latest figure, based on more complete statistics, means the economy grew at a solid pace in the quarter but still at the slowest rate in more than a year.
Federal Reserve Chairman Alan Greenspan in July called the noticeable loss of economic momentum a temporary "soft patch" and blamed much of it on the surge in energy costs in May, when oil prices topped $40 a barrel for the first time and the average U.S. price of regular gasoline peaked above $2 a gallon.
"The soft patch appears somewhat milder than previously estimated," Peter E. Kretzmer, senior economist at Bank of America Corp., wrote yesterday in an analysis of the GDP report.
Fed officials said after their meeting last week that economic growth appeared to have "regained some traction" recently, with signs of gains in hiring, consumer spending and manufacturing.
But the rise in energy prices this week, with benchmark U.S. crude oil prices passing $49 a barrel and average gasoline prices exceeding $1.90, has renewed concerns that economic growth may not pick up meaningfully in coming months, and could falter again.
"The economic recovery is slowing," said Peter Morici, a professor at the University of Maryland's business school. He predicted that unemployment will rise if oil prices stay near $50 a barrel. "Higher gas prices and rising health care costs are taxing consumers, and record imports are siphoning sales from U.S. businesses," he said.
With President Bush and Democratic presidential candidate John F. Kerry battling to mold voters' perceptions of the economy in the last weeks of the campaign, the GDP report provided arguments for both sides.
Commerce Secretary Donald L. Evans noted that the revised GDP figure primarily reflected stronger growth in U.S exports and business inventories than earlier estimated.
"President Bush's economic agenda is a clear win-win for American families and businesses defeating our critics' no-win pessimism . . ," Evans said in a statement.
The Kerry campaign noted that U.S. goods exports and business fixed investment both declined, after adjusting for inflation, from the first quarter of 2001, when Bush took office, through the second quarter of this year.
"No amount of spin is going to change the fact that these new numbers confirm that George Bush has had one of the worst economic records of any U.S. president since Hoover in the Great Depression," Kerry campaign spokesman Phil Singer said in a prepared statement.
The Commerce Department bases its initial GDP estimates each quarter on incomplete economic data and then revises them over time as more information becomes available.
The latest report showed that, even with the upward revision, economic growth slowed to a 3.3 percent annual rate in the spring quarter, after adjusting for inflation and seasonal variations, from a 4.5 percent pace in the first three months of the year.
Consumer spending slowed significantly in the second quarter, growing at a 1.6 percent annual rate after rising at a 4.1 percent pace in the first quarter.
Households spent less on motor vehicles, clothing, shoes, gasoline and other energy products, and spent more on food, housing and medical care, the report showed.
Exports grew at a 7.3 percent annual rate in the second quarter, the same as they did in the previous quarter. But imports grew faster, at a 12.6 percent pace in the spring, up from 10.6 percent at the beginning of the year.
The economy is expanding at around a 3.5 percent annual rate in the quarter that ends today, according to many analysts' estimates.
Analysts will get a better sense of the economy's current strength today when the government releases figures on personal spending and income for August, and next week when it reports on September employment.