Exports Give U.S. Economy 2Q Spurt

Tax Rebates Boost Consumer Spending, But Officials Warn of Trouble Ahead

(AP)  The U.S. economy shifted to a higher gear in the spring, growing at its fastest pace in nearly a year as foreign buyers snapped up U.S. exports and tax rebates spurred shoppers at home.

The Commerce Department reported Thursday that gross domestic product, or GDP, increased at a 3.3 percent annual rate in the April-June quarter. The revised reading was much better than the government's initial estimate of a 1.9 percent pace and exceeded economists' expectations for a 2.7 percent growth rate.

The rebound comes after two dismal quarters. The economy actually shrank in the final three months of 2007 and limped into the first quarter at a feeble 0.9 percent pace. The 3.3 percent growth in the spring was the best performance since the third quarter of last year, when the economy was chugging along at a brisk 4.8 percent pace.

Still, the growth pickup is not likely to be seen as a lasting sign that the fragile economy is back on solid ground.

Federal Reserve Chairman Ben Bernanke recently warned the economy will be weak through the rest of this year. A growing number of analysts fear that the country will hit another economic pothole in the fourth quarter, as the bracing impact of the tax rebates disappears. And there are concerns exports could tail off as other countries' economies slow down.

GDP measures the value of all goods and services produced within the U.S. and is the best barometer of the country's economic health.

The economy is the top concern for Americans. Democratic presidential contender Barack Obama favors a second government stimulus package, while Republican rival John McCain supports free trade and other business measures to energize the economy.

Housing, credit and financial troubles have pounded the economy.

In turn, employers have clamped down on hiring, driving the U.S.'s unemployment rate up to 5.7 percent in July, a four-year high. The Labor Department said Thursday that the number of people signing up for jobless benefits declined last week for the third straight period, but claims remained above 400,000, an indicator of a slowing economy.

Employers have cut jobs every month this year and wage growth is trailing inflation. That combination raises concerns about the future of consumer spending, one of the pillars underpinning the economy.

The biggest factor in the second-quarter's rebound was robust sales of U.S. exports to other countries. The weaker value of the U.S. dollar has bolstered those sales. Exports grew at a 13.2 percent pace in the spring. That was much stronger than the government's initial estimate of a 9.2 percent growth rate, and more than double the 5.1 percent growth rate logged in the first quarter.

Imports, meanwhile, fell at a 7.6 percent annualized pace in the spring, as economic troubles in the U.S. crimped demand for foreign-made goods.

The improved trade picture added 3.1 percentage points to second-quarter GDP, the most since 1980.

U.S. consumers boosted their spending at a 1.7 percent pace in the second quarter. That was slightly better than the 1.5 percent growth rate initially reported and marked the best showing in nearly a year. Government stimulus checks of up to $600 a person helped energize shoppers who had hunkered down amid the economy's problems.

One of the country's biggest problems - the housing collapse - was evident in the GDP report.

Builders cut back at an annual rate of 15.7 percent in the second quarter, although that was a better showing than early this year and late last year.

Businesses trimmed spending on equipment and software in the spring. And, they reduced investment in inventories, but not as much as initially estimated by the government. That was another factor contributing to the improved GDP reading.

One measure of corporate profits showed companies losing ground in the second quarter. After-tax profits fell 3.8 percent in the spring, compared with a 1.1 percent increase in the first quarter.

An inflation gauge tied to the GDP report showed all prices rising at a rate of 4.2 percent in the second quarter, the same as initially estimated.

Taking out energy and food, prices rose 2.1 percent. That also was unchanged from the government's previous estimate but remained outside the Federal Reserve's comfort zone.

With the economy still coping with fallout from housing and credit problems, the Fed is expected to hold interest rates steady at its next meeting on Sept. 16, and probably through the rest of this year.

[harp1963]

Exports, you mean will still make something here in America. I don''t believe it.

Surely there is some third world peasant farmer out there who wants to spend 20 hours a day with his grade school age children working in American owned factories for 3 bowls of mush a day.

Come on corporate America, what the Hell is going on, you educated idiots left some jobs in America where the evil unions might want real pay and benefits. You could be building 50 or 60 more fully staffed castles around the world to spend a day or two in a year. You all need to go out and rent the movie "Wall Street." Remember, Micheal Douglas says, "Greed is good." Well, at least until your standing before the Lord that is.

[jtdev1]

The surge in exports was only in our exporting of debt.

You know we''re #1 at that...

[oneworldusa]

Funny how Bush can move America''s prime concern from the Billions and Billions wasted on an unfounded war in Iraq to the faltering US economy. Neither is good.

[whitemale08]

The forum topic makes for good debate. I always read Whitemales posts. This line has me scratching my head a little. "The more a country exports indicates the inability for "domestic" consumers to afford their own products" If we have a surplus of something shouldn''''t the price come down for us?

Posted by lewiston14 at 02:50 PM : Aug 28, 2008--

I''m glad you check out my posts, my point about "export growth" was that we are not exporting because we have a surplus, that''s evident by the turmoil in the airline industry...

...but because of inflation and that inflation is spreading worldwide because the "dollar" is the world''s reserve currency.

That''s why even a spike in exports will be short-lived because the Global Financial System is based on monetizing debt. And now there is no way to grow debt to be collaterized and fund the economy.

The global sub-prime "debt-liquidity-machine" is shut down as of last year in August. If you can''t grow debt in a post Brettonn/Woods system then our economy will gradually detiorate to zero unless interrupted by WWIII.

Sure the Federal Reserve can print money without collaterizing debt for a short while but the hyper-inflation that this is already causing will consume the economy as well.

[lewiston14]

The forum topic makes for good debate. I always read Whitemales posts. This line has me scratching my head a little. "The more a country exports indicates the inability for "domestic" consumers to afford their own products" If we have a surplus of something shouldn''t the price come down for us?

[whitemale08]

there''s not that much we export except for weapons and airplanes.

A good example of how we export what we can no longer afford is airplanes.

we no longer are able fly not even P. Diddy.

So this article needs to thrown in the trash...it''s not GOOD NEWS!!!

[marshall_nee]

Always the same in election years, pump the economy up till after the election then let it tank. Exactly the same happened under Clintoon and Greedscam in 2000.

[lewiston14]

Forget the rebates they have long been spent on imports. $600 dont go very far. Must be getting closer to election time. Cooking the books a little never hurts.

[whitemale08]

It''s amazing to see "Republican Suicide Bombers" get all happy over snipets of "good economic news". I would say that this is the #1 reason why Republicans are stupid.

They can''t see that whatever "increase in exports" is what the IMF, World Bank and Wall Street demand from 3rd world countries.

The more a country exports indicates the inability for "domestic" consumers to afford their own products.

"Export growth" under an inflationary monetary system with a fiat-currency is by definition "serfdom" the type that the "framers" used "tarriffs" against.

Alex Huxley (a famous eugenicists) said "use technology to teach a serf to love his [serfdom] conditions that he would normally if sane would reject".

And according to some of these posts praising this so-called "good economic news" makes Alex Huxley right.

When a car runs out of gas it will give a few more "putt putt" before it finally stops; this Global Financial System is out of gas and is puttering to a screeching halt...Mark my words.

This whole mentality of "until it happens to me, everythinng is fantastic" is what will be your demise.

THERE IS NO NEW CREDIT DERIVATIVES BUBBLE TO REPLACE THE GLOBAL HOUSING DERIVATIVES BUBBLE!!! NOTHING EXCEPT WWIII!!! TO BRING THE WORLD''S POPULATION LEVELS BACK TO 1913 LEVELS AT THE CREATION OF THE FEDERAL RESERVE SYSTEWM TO START IT ALL OVER AGAIN!!!!

[lewiston14]

We don''''t produce anything anymore. We only export things we''''ve imported from china (with a huge markup)

Posted by jtdev1

I was going to ask the very same question What do we make that they don''t make allready. Lets see we make good missiles and bombs, Some decent airplanes, millions of tons of frozen chickens so our chickens cost $10 each, and alot of grains that make a loaf of bread here $3. That is about all I can think of. Big macs dont travel well so it cant be them. Im looking out the window trying to find things we make and sell. We sell a few cars we export alot of our own oil, We export jobs, We export coal. I was thinking lumber but no we get most of that from Canada. So what do we make other countries want?

[jtdev1]

I don''t know why everyone is so excited about the increase in our exports.

We don''t produce anything anymore. We only export things we''ve imported from china (with a huge markup)

[marshall_nee]

Does this mean that the Fed is going to start hiking rates again?



Is that crickets I can hear???

[puldr]

I''ve always heard that war is good for the economy, but apparently not the Bush-McCain war. If the piddly tax rebates helped the economy so much, just imagine the boost to the economy from spending the billions here instead of in Iraq will do!