The U.S. economy bounced back sharply in the second quarter, according to the Commerce Department's first estimate, growing at a much faster-than-expected four percent annual rate. Conway G. Gittens reports.
The U.S. economy is back in a big way. U.S. GDP up 4 percent- a full percentage point better than forecasts. The news comes after the first quarter brought the largest contraction in five years due largely to the weather. Consumer spending accelerated at a 2.5 percent pace- with Americans buying long lasting goods at a dizzying pace. But big-ticket items require consumers to take on debt and that's not always good for the economy in the long run, says House of Debt co-author and University of Chicago Booth School of Business professor Amir Sufi. SOUNDBITE: AMIR SUFI, CO-AUTHOR, HOUSE OF DEBT/UNIVERISTY OF CHICAGO BOOTH SCHOOL OF BUSINESS PROFESSOR (ENGLISH) SAYING: "What's no surprise to me is that we are starting to see a stronger consumer at exactly the time that we are seeing an expansion of credit in both the credit card space and the auto loan space to exactly the kind of low credit score borrowers that drove very much the economy during the sub-prime mortgage boom. So it seems like the U.S. economy is able to get growth, but the only way it seems to be able to get growth is if we start extending credit again to lower-credit score individuals." Debt worries aside, growth in the second quarter was driven mainly by consumer spending. There also was a swing in business inventories. Exports and business spending- came in strong as well- making for a solid broad based platform for economic growth. The Fed gets this news just as it starts the second day of its two-day meeting- and so it could factor into the timing of when rate hikes will begin.