Economy Grows at 1.3% in Second Quarter

The government's third and final read on economic growth in the second quarter was encouraging but still not enough to dispel worries about a potential economic recession.

Gross domestic product grew in the second quarter at 1.3%, according to the Department of Commerce. The latest reading was slightly better than expectations but not much of a surprise.

The market anticipated an upward revision to 1.2%, from the last reported estimate of 1%.

The government's latest reading increased due to increases in personal consumption, exports and government spending. Computer sales added a small 0.07 percentage point boost to second quarter GDP. Consumption growth increased to 0.7% from 0.4%. In total, the government added $11.3 billion to the final estimate on second quarter GDP.

David Ader, market strategist at CRT Capital Group, writes that one negative part of the report shows business investment sliding from the first estimate.

"The weakness in second quarter consumption is now estimated to be almost wholly centered on durable goods (down 5.3%), reflecting the slump in auto sales, which should partly reverse in the third quarter," according to a report by Barclays Capital.

David Semmens, economist with Standard Chartered Bank, describes the latest growth estimates as "a more favorable mix." However he writes that "it is still very hard to mask a poor end to a terrible first half. The market is far more focused on what is going on now given this release is a quarter out of date." The government estimated the first quarter GDP ticked up by 0.4%.

Economic growth in the second quarter is at a level comparable to the third quarter of 2009, when the economy grew at 1.7%. U.S. GDP slipped 2.7% in 2009 and edged up by 2.9% in 2010.

Economists and investors are hoping that growth in the second half of the year will be much better than the first half. Capital Economists says that growth from July through September may have accelerated to around 2.5%.

The government's release on its third q! uarter e stimate is scheduled for Oct. 27.

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