US economic growth ahead of forecast

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON (AP) -- The U.S. economy grew at a 1.7 percent annual rate in the April-June quarter, boosted by slightly stronger consumer spending and greater exports.

The Commerce Department said Wednesday that growth was marginally better than its initial estimate of 1.5 percent.

Economists expect some improvement in growth in the second half of the year after seeing more positive data in July. But most believe the economy will keep growing at a subpar rate of around 2 percent.

Growth at or below 2 percent is not enough to lower the unemployment rate, which was 8.3 percent in July. Most expect the unemployment rate to stay above 8 percent for the rest of this year.

A weak economy and high unemployment could hurt President Barack Obama re-election chances and bolster Republican candidate Mitt Romney's campaign.

The report on economic growth measures the gross domestic output, the country's total output of goods and services. It measures everything from the purchase of restaurant meals to construction of highways and bridges. The report Wednesday was the government's second look at GDP for the spring quarter. There will be a third and final estimate of second quarter GDP released next month.

The third quarter began with some promise.

Employers created 163,000 jobs in July, the most since February. Also in July, consumers stepped up retail spending, factories produced more goods and the housing recovery continued with increases in both new and previously occupied homes.

The upward revision to second-quarter growth was largely because consumers spent at a slightly faster pace than first estimated. Consumer spending grew a 1.7 percent rate, better than the 1.5 percent initial estimated. Exports, which add to growth, were also stronger, growing at a 6 percent rate.

Government spending, which has been a drag on growth for the past two years, contracted again in the second quarter. But the decline at an annual rate of 0.9 percent was less than the initial estimated drop of 1.4 percent. That reflected a much smaller dip in defense spending than first estimated.

All of the changes boosted economic output by $6.5 billion more than previously estimated, leaving total GDP at $13.56 trillion, after adjusting for inflation, in the second quarter.