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TheStreet Open House

Better Economic Growth Likely To Follow Weak Q2

Most economists blame tax increases and government spending cuts for the sluggish second quarter. Higher taxes slowed consumer spending. And government cuts subtracted nearly a full percentage point from growth at the start of the year.

Even so, the solid pace of hiring suggests the economy is doing better than the growth figures show. Tax receipts have been stronger. Faster growth in the second half of the year would help close those gaps.

The government is also expected to release comprehensive revisions on Wednesday. Roughly every five years, the department incorporates more recent data and adjusts how it calculates GDP.

The revisions will likely show growth was faster in the first quarter and last year than previously estimated, economist say. Michelle Meyer, an economist at Bank of America Merrill Lynch, estimates the revisions could add up to a half-point to last year's 2.2 percent growth rate.

The revisions will also alter GDP data all the way back to 1929. In one major change, the government plans to count spending on research and development as investment, rather than as a regular cost of doing business. That, along with other changes, will boost the level of GDP in 2007 by about 3 percent, or $450 billion. It isn't likely to significantly change the pace of growth in recent years.

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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