The U.S. economy grew in the second quarter at a modest seasonally adjusted annual rate of 1.7 percent, the government said Wednesday, as businesses spent more and the government cut less. The Commerce Department reported that growth improved from a 1.1 percent rate in the January-March quarter, which was revised from an initial 1.8 percent rate. While growth remains sluggish, the pickup was surprising as most economists predicted a far weaker second quarter, and it suggests that the economy could accelerate later this year, as businesses step up spending and the drag from severe government cuts fade. The April to June growth indicates that "the recovery is gaining momentum," Paul Ashworth, an economist at Capital Economics, said in a note to his clients. Businesses increased their spending 4.6 percent in the second quarter after cutting by the same amount in the previous quarter. Spending on home construction grew 13.4 percent, which is in line with the previous quarter. At the same time, the U.S. government cut spending only 1.5 percent after an 8.4 percent plunge in the first quarter. State and local governments increased spending for the first time in a year. The biggest part of the economy is consumer spending and that grew more slowly in the second quarter. And a surge in imports reduced growth by the most in three years. Still, economists are hopeful consumer spending will rebound and growth could improve to around 2.5 percent in the third and fourth quarters. There were signs in the report that companies expect demand to pick up. Businesses added to their stockpiles in the second quarter, which is typically a sign they foresee greater sales. The government also released comprehensive revisions that updated the country's gross domestic product (GDP) over the last several decades. Those figures showed that the economy grew at a stronger 2.8 percent in 2012, up from an earlier estimate of 2.2 percent. Last year's first quarter was revised much higher, while the economy barely expanded in the fourth quarter.
