Wednesday’s news comes on the heels of dismal performance in the first quarter. Economy grows in second quarter

The U.S. economy rebounded strongly in the spring, according to government data released on Wednesday, helping ease concerns about the significant contraction during the first three months of the year.

The Commerce Department said gross domestic product (GDP) grew at an annual rate of 4 percent during the second quarter, far surpassing expectations. Analysts were projecting 3.1 percent growth in the government’s first estimate of economic growth for the second quarter, according to a Bloomberg consensus.


Wednesday’s news comes on the heels of dismal performance in the first quarter, when the economy shrank by 2.1 percent, according to the government’s latest revision. Analysts largely attributed the contraction to harsh weather conditions this winter and had forecasted second quarter performance to show significant improvement.

“Not only did second-quarter GDP rebound by 4.0% annualized, but the decline in the first quarter was trimmed to 2.1%, from 2.9%, and other revisions show the economy growing at an even faster pace than previously believed in the second half of last year,” said Paul Ashworth, chief U.S. economist with Capital Economics. “As a result, it now looks like the economy will expand by about 2% this year, higher than our previous 1.7% forecast.”

GDP growth — the broadest measure of the national economy — and labor market conditions serve as important indicators of the state of the recovery, and both are being closely scrutinized by Democrats and Republicans alike going into the 2014 midterm elections.

The robust GDP growth from April to June will likely serve as a helpful talking point about an improving economy when President Barack Obama delivers remarks on Wednesday at an event in Kansas City, Missouri.

The numbers released on Wednesday are the government’s first stab at measuring economic growth for the second quarter and it could be significantly revised in the coming weeks when new estimates are produced.

The initial second quarter GDP reading sets the stage for several other key economic data releases this week, including the July jobs report on Friday. The unemployment rate stands at 6.1 percent and the economy added 288,000 jobs in June.

Meanwhile, the Federal Reserve announced Wednesday afternoon that it will scale back its economic stimulus program by an additional $10 billion as the economy shows signs of steady improvement. Starting in August, the Fed will purchase $25 billion in bonds each month as a part of its monetary policy program known as quantitative easing, which is aimed at keeping long-term interest rates low in an effort to stimulate spending and investment.

The Fed’s policy-making committee pointed to improved labor market conditions and a falling unemployment rate, but maintained its forward guidance on short-term interest rates. The committee said the first rate hike would not come for a “considerable time” after the Fed’s bond buying stimulus program is fully wound down. This is widely expected to be announced at the Fed’s October meeting.

“[E]conomic activity rebounded in the second quarter,” the Federal Open Market Committee said in a statement at the conclusion of its two-day policy meeting. “The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat.”

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