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Economy grows 2.3 percent in spring; first quarter revised higher

WASHINGTON — The U.S. economy rebounded this spring, posting annualized growth of 2.3 percent, and new data indicate that there was no contraction in the first quarter after all, the Commerce Department said Thursday.

The modest second-quarter figure — the first of three estimates by the government — fell short of economists' forecasts of 2.9 percent annualized growth.

But that disappointment was partly offset by a significant upward revision to first-quarter growth.

Total economic output, also known as gross domestic product, increased at a 0.6 percent annualized rate from January through March, the Commerce Department said in its final estimate for the quarter.

That was a major improvement from the 0.2 percent annualized contraction in a report last month.

Taken together, the new data indicate that the economy expanded at about a 1.5 percent annual rate in the first half of the year. The weak performance is well below the economy's potential and worse than last year's tepid 1.9 percent first-half growth.

On Wednesday, Fed policymakers issued an upbeat assessment of the economy's progress after concluding a two-day meeting. But they left interest rates near zero, where they've been since late 2008, when the recession and financial crisis reached a nadir.

Most experts are looking for a move by the central bank this year, although opinion is divided over whether that means an increase when Fed policymakers next meet in September, or at their final meeting of the year in December.

Economists said unusually bad winter weather and a labor dispute at West Coast ports slowed first-quarter growth this year. However, the hit was not nearly as bad as initially believed.

The Commerce Department first estimated that the economy contracted at a 0.7 percent annual rate in the first quarter, a figure that now has been revised upward twice.

Noting other first-quarter slowdowns in recent years, some analysts suggested that there were problems with the Commerce Department's seasonal adjustments.

On Thursday, as part of its annual revisions of data, the department's Bureau of Economic Analysis said it was introducing new seasonal adjustment methods for key inputs such as federal defense spending and consumer spending on services.

The revisions also showed that growth was weaker from 2011 to 2014 than originally reported.

The economy expanded at an average annual rate of 2 percent during that period, down from an earlier estimate of 2.3 percent.

The improved growth in this year's second quarter was fueled by an increase in exports, consumer purchases and spending by state and local governments.

Exports, which have been hurt by a rising dollar, increased 5.3 percent from April through June after they had plunged 6 percent in the first quarter.

Consumer spending rose 2.9 percent in the second quarter, up from a weak 1.8 percent rise in the previous quarter, and state and local governments increased their spending by 2 percent after a 0.8 percent decrease in the first quarter.

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