U.S. GDP grew 2.8 pct in 2012, faster than earlier reported

WASHINGTON, July 31 Wed Jul 31, 2013 8:50am EDT

WASHINGTON, July 31 (Reuters) - America's economic output grew much more quickly than previously estimated in 2012, according to revised data that bolsters the view that the U.S. economy may have turned a corner that year.

Gross domestic product expanded 2.8 percent in 2012, the fastest rate of growth since 2005, the Commerce Department said on Wednesday, but much of the growth was seen early in the year.

The government had previously said that output grew 2.2 percent during the year but changed its estimate after reviewing new data on retail spending, home building and drilling in the oil and gas industries.

The new estimates are part of a regular annual revision of the data by government analysts and accompanied data that showed the economy unexpectedly accelerated in the second quarter of 2013.

Battered by the 2007-09 recession, the United States has posted a generally slow recovery. But early in 2012, housing prices began to rise for the first time since 2006.

This helped lift consumers' spirits and made them less wary of opening their wallets. Consumer spending had already looked respectable in prior estimates, though the revised data showed it adding two tenths of a percentage point more to economic growth than previously believed.

The rise in home prices also spurred construction which added to economic growth last year for the first time since 2005. The revisions showed home building added a little more than previously thought.

The turnaround in housing, coupled with rising incomes and improvements in household finances, boosted confidence that the economy was poised to pick up its pace of expansion.

Still, the added expansion in 2012 was entirely in the first quarter of the year, and subsequent revisions that year were all downward.

GDP accounting can be jumpy between quarters as firms clear and then restock their shelves, but the economy did appear to lose momentum as the year progressed. The government also downwardly revised growth for the first quarter of 2013.

This year's revisions of GDP incorporate new concepts and methodologies for estimates of the nation's economic output all the way back to 1929.

The government now considers research and development spending as a fixed investment, meaning it will start adding to GDP. Previously, R&D was tallied as a cost of doing business, so it did not directly boost economic growth.

But while the methodological changes added about 3 percent to the total size of the U.S. economy, they did not significantly change growth rates for GDP, said Brent Moulton, associate director for national economic accounts at the Commerce Department's Bureau of Economic Analysis.