The US economy grew solidly at a 3.4 per cent annual rate in the second quarter, the government reported today, just slightly below the first quarter's pace and with room to grow as stocks of unsold goods fell for the first time in two years.
While second-quarter growth eased from a 3.8 per cent rate in the first three months of the year, it nonetheless marked the ninth straight quarter in which gross domestic product or GDP increased at a rate exceeding 3 per cent, Commerce Department figures showed.
The first snapshot of second-quarter GDP matched Wall Street economists' expectations. The figure will be revised twice in coming months as more data on the economy's performance arrive. GDP measures the value of all goods and services produced within US borders.
Separately, the Labor Department reported that employment costs continued to gain moderately in the second quarter, at a 0.7 per cent annual rate that matched the first quarter's pace and indicated that employees were sharing some of the bounty from a growing economy.
The Employment Cost Index is a broad measure of what employers pay in wages and benefits. The second-quarter data showed pay increased 0.6 per cent in the April-June period, matching the gain recorded in the January-March quarter.
Most measures of GDP activity remained healthy in the second quarter, with consumer spending increasing at a 3.3 per cent rate after growing at a 3.5 per cent rate in the first quarter.
Business investment advanced at a 9 per cent rate after growing 5.7 per cent in the first three months of the year.
Companies drew down inventories at a $6.4-billion annual rate during the second quarter - the first time they reduced stocks since the second quarter of 2003 - after boosting them by $58.2 billion in the first quarter.
Much of the drawdown appeared to be related to carmakers clearing the way for new models but, in general, lower inventories leave room for companies to ramp up future production. Analysts said the reduction in inventories, which acted as a damper on second-quarter growth, boosts the likelihood that US interest rates will keep rising since the Federal Reserve will be wary that stronger growth in the future might fuel bigger price gains.
Analysts said the employment costs figures also were encouraging, since they did not point to hefty wage demands that can foster inflation. Over a 12-month period ending June 30, wages and salaries have grown just 2.4 per cent, the smallest advance since the series began in the early 1980s and a fourth straight quarter in which that was the case.