The economy grew by 1.7 percent in the second quarter, the Commerce Department reported Wednesday, coming in far ahead of consensus expectations, which had been around 1 percent. That is positive news for the recovery, though it came packaged with a more troubling revision: Growth in first-quarter gross domestic product was revised downward from 1.8 percent to 1.1 percent.
The acceleration in second-quarter GDP was due in part to increased nonresidential fixed investment, such as business spending on factories and equipment. Declines in federal spending also slowed in the second quarter, from an 8.4 percent drop in the first quarter to a 1.5 percent decline in the second quarter. In addition, a bump in state and local government spending contributed to the increased rate of economic growth.
Consumer spending also contributed to second-quarter GDP growth, though the spending slowed from a growth rate of 2.3 percent in the first quarter to a 1.8 percent growth rate.
The report contained a few positive signs, such as indications that firms are increasingly willing to invest.
"Businesses invested heavily in everything, a sign that maybe conditions are better than is being indicated in this report," writes Joel Naroff, president and chief economist at Naroff Economic Advisors, in a reaction to the GDP figures.
In addition, the apparent decline in government spending cuts may mean that defense cuts were "front-loaded" in late 2012 and early 2013, says James Marple, senior economist at TD Economics. If that's the case, that could mean less pain going forward, as cuts slow.
Still, Marple adds, the latest GDP report does not reflect a consistent recovery.
"While the reading on second quarter growth came in above expectations, it does not change the story of weak economic growth in the first half of the year," Marple wrote in a commentary on the numbers.
This middling growth further complicates an already-muddy picture of the economy facing the Federal Reserve as it concludes today its latest two-day meeting.
"While this is a better than expected report, it isn't very strong," Naroff writes. "If you look at the past three quarters, the economy has not done very much. That is the economic environment facing the Fed as it meets today."
While the first half of 2013 might have disappointed in some ways, the Commerce Department also reported that the last few years of recovery have been stronger than originally thought. Today's GDP report contained revisions for prior years and showed that 2012's GDP growth was revised upward to 2.8 percent from 2.2 percent. The prior year remained unchanged at 1.8 percent, and 2010 was bumped slightly upward, from 2.4 to 2.5 percent.