U.S. economy saw modest growth in second quarter

After a harsh winter, the U.S. economy rebounded in the April-June quarter, led by a surge in consumer spending and a recovery in foreign trade.

The Commerce Department says the gross domestic product, the economy's total output of goods and services, expanded at a 2.3 percent annual rate in the second quarter, up from a 0.6 percent first quarter increase. The first-quarter figure was revised from a previous estimate of a 0.2 percent decline.

Growth in the second quarter fell short of consensus forecasts of 2.5 percent.

The spring rebound reflected a jump in consumer spending and a swing in trade from a significant drag to a small positive for growth. Consumption grew at a 2.9 percent annual rate in the second quarter, up from a 1.1 percent rate in the January-to-March period.

The main drags on growth in the second quarter were reduced government spending and rising U.S. imports.

Economic activity slowed sharply in the first three months of the year, hurt by severe winter weather and other factors including a work slowdown at West Coast ports.

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But the economy has picked up speed since that early-year freeze, buoyed by healthy job growth. Economists are looking for growth to strengthen in the second half of this year, as consumer spending is bolstered by employment gains.

The latest growth figures likely keep the Federal Reserve on track to raise interest rates later this year. That would represent the first move to tighten monetary policy since the Fed lowered rates in 2009 to shore up growth following the housing crash.

Most forecasters expect the central bank to pull the trigger on a rate hike in September. Raising borrowing costs could dampen growth, but Fed officials say they expect to raise rates gradually.

Although the economy is gaining speed, new government data underline the overall weakness of the recovery. The Commerce Department says the economy expanded at just a 2 percent annual rate from 2012 through 2014, down from a previous estimate of 2.3 percent.

Nearly all the weaker-than-expected growth occurred in 2013, when the government now says the economy expanded just 1.5 percent, much less than its previous 2.2 percent estimate.

The first 23 quarters of the recovery, which officially began in June of 2009, show an annual rate of growth of only 2.1 percent, according to High Frequency Economics. That is a much slower pace of expansion than after previous recessions.

"Bottom line, first-half GDP growth is averaging 1.5 percent, and even if we get 3-3.5 percent growth in the second half of the year, we're still stuck in the 2-2.5 percent type growth environment," said Peter Boockvar, chief market analyst with The Lindsey Group, in a note.