Here is the report from Bloomberg:
Surging exports and business spending propelled U.S. growth to the fastest pace in more than a year before turmoil in the credit markets forced the Federal Reserve to warn of a bleaker outlook.
Gross domestic product rose at a 4 percent annual rate in the second quarter, the Commerce Department said in Washington, up from an initial estimate of 3.4 percent. The median forecast of economists polled by Bloomberg News was 4.1 percent.
The figures may be the peak of the expansion for this year as the cost of borrowing increased in August and the Fed said that risks to growth ``increased appreciably.'' In a sign that the labor market is weakening, separate government numbers today showed claims for jobless benefits climbed to the highest level since April.
``The underlying economy was growing in the first half,'' said Peter Kretzmer, a senior economist at Banc of America Securities LLC in New York. ``We expect it to slow modestly, but not in such a pronounced way. It will slow enough, though, that the Fed will find an excuse'' to reduce interest rates, he said.
Kretzmer accurately predicted the pace of expansion.
The Fed's preferred inflation measure, which is tied to consumer spending and strips out food and energy costs, rose at a 1.3 percent annual rate. The pace of increase was the slowest in four years.
Personal Consumption Expenditures increase 1.4%, whith is .1% less than the previous number.
Non-residential structures investment increased 27.7%. This number was about 22% in the first GDP report. This pace is unsustainable. I have speculated this surge is the last big move in the investment field from the nonresidential sector. The turmoil in the mortgage markets adds to the credibility of that analysis.
Exports increased 7.6%. This plays into the "foreign market demand will help to prevent a recession" argument, which has also led the bulls to again recommend large US industrial and basic materials companies that have strong international exposure.
Federal spending increased 5.9%. This is also unsustainable, and I expect this rate of increase to slow down in the next few quarters.
This report gives the Fed plenty of reason to not lower interest rates at their next meeting.
