U.S. second-quarter growth revised up, Fed still seen in play

WASHINGTON, Wed Aug 29, 2012 – The U.S. economy fared slightly better than initially thought in the second quarter, but the pace of growth remained too slow to shut the door on further monetary easing from the Federal Reserve.

Gross domestic product expanded at a 1.7 percent annual rate, the Commerce Department said on Wednesday as stronger export growth offset a pull-back in restocking by businesses wary of sluggish domestic demand.

That was up from the government’s initial estimate of 1.5 percent growth released last month and in line with economists’ expectations. The economy grew at a 2.0 percent pace in the January-March period.

The report also showed that after-tax corporate profits unexpectedly rose at a 1.1 percent rate after sinking 8.6 percent in the first quarter.

While the composition of economic activity was fairly favorable, growth remains well below the 2-2.5 percent rate required every quarter to hold the unemployment rate steady, which could compel policymakers at the U.S. central bank to offer additional stimulus at their September 12-13 meeting.

“It shows slightly better government spending and consumer spending but overall the data suggest the economy stays in slow growth mode and is not likely to change,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York. “This certainly strengthens the hands of the Fed to aid the economy.”