Second quarter GDP revised even higher

A surprise on top of a surprise, the U.S. economy grew at an annual rate of 4.2 percent from April to June, the government reported Thursday in a second estimate.

That is even stronger than the surprising 4.0 percent first estimate of second-quarter growth from the Commerce Department, and suggests when taken with other indicators that the U.S. economy is firming up.

The second estimate is based on more complete data, and many had expected the scorching first-estimate would be revised downwards. After all, it followed a first-quarter rate that was a contraction of 2.1 percent.

But the department’s Bureau of Economic Analysis Thursday found that the trends reported in July’s first estimate of second-quarter growth held true.

"With this second estimate for the second quarter, the general picture of economic growth remains the same; the increase in nonresidential fixed investment was larger than previously estimated, while the increase in private inventory investment was smaller than previously estimated," the BEA said.

It means that businesses invested more than first thought, and the contribution from businesses replenishing their stocks was smaller than thought.

Most sectors of the economy contributed to the rise in gross domestic product, which is the sum of U.S. goods and services. Exports, state and local government spending and personal consumption all helped fuel the growth surge. Imports subtract from GDP, and also increased, meaning growth would have been even stronger if not for the influx of goods from China and elsewhere.

Adding to the sense of economic improvement, auto sales continue to sizzle and the labor market is healing. One indicator is the number of people filing first-time claims for unemployment benefits. They were 298,000 for the week ending Aug. 23, the Labor Department said Thursday.

Over four weeks they have averaged 299,750. Anything under 300,000 is a sign of healthy economy, and it suggests another strong month of hiring when the Labor Department reports the August employment report next week.