Economy Continues Solid Growth

The economy clocked in at a robust 3.4 percent annual growth rate in the second quarter, fresh evidence the country's business climate is sunny despite surging energy costs.

The solid increase in the gross domestic product for the April-to-June quarter, reported by the Commerce Department on Friday, came on the heels of a larger 3.8 percent growth rate in the opening quarter of this year.

GDP measures the value of all goods and services produced within the United States and is considered the broadest barometer of the country's economic standing.

Despite the toll of elevated energy prices, consumers and businesses still managed to boost spending and investment modestly, helping to underpin overall economic growth in the second quarter.

The main reason why growth slowed in the second quarter compared with the first was that businesses were working off excess supplies of goods. That actually subtracted 2.32 percentage points from GDP. In the first quarter, businesses had bulked up their inventories.

The showing for the second quarter was slightly lower than the 3.5 percent pace that economists were forecasting before the release of the GDP report.

The economy's recovery from the 2001 recession turned out to be weaker than the government previously had estimated, according to new figures — part of comprehensive annual revisions of the GDP data — also released on Friday.

Economic growth averaged 2.8 percent over the last three years, down from the 3.1 percent that originally had been reported for the period.

For all of 2004, the new figures show the economy expanded by 4.2 percent, versus the old estimate of 4.4 percent. Even with the slightly lower growth, last year's performance was still the best since 1999.