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Weak U.S. economic growth expected for 2Q

The nation's unemployment rate is still high at

The nation's unemployment rate is still high at 7.6 percent, limiting consumer spending. Above, current and former military personnel attend a job fair last year in San Diego. (Sept. 6, 2012) Credit: Getty Images

The economy is expected to have grown at a dismal pace in the April-June quarter, weighed down by large tax increases and steep government spending cuts.

But the second quarter should be the low point for the year, economists say. The fiscal drag is expected to fade. At the same time, steady hiring, more business spending and a solid recovery in housing should push growth higher in the second half of the year.

Economists forecast that growth slowed in the April-June quarter to a seasonally adjusted annual rate of just 1 percent, according to a survey by FactSet. That's below the tepid rate of 1.8 percent in the January-March quarter.

The Commerce Department will release the first estimate of gross domestic product, or GDP, for the second quarter this morning. GDP is the broadest measure of the output of goods and services, including everything from manicures to industrial machinery.

Most economists say growth is already starting to pick up. And many are predicting annual growth rates of between 2 percent and 3 percent in the third and fourth quarters.

There are threats to the better outlook. Unemployment is still high at 7.6 percent, limiting consumer spending. And budget fights in Washington could lead to a government shutdown this fall, potentially disrupting the economy.

Still, recent data have been encouraging.

"More and more of the economic tea leaves are pointing in the same direction: toward a growth revival ahead," Scott Anderson, chief economist at the Bank of the West, said.

Home construction, sales and prices have been growing since early last year. Americans purchased newly built homes in June at the fastest pace in five years. That's raised builder confidence to a seven-year high, which should lead to increases in construction and more jobs.

And overall hiring has accelerated this year.

Federal Reserve officials have forecast better growth in the second half of the year. And Fed Chairman Ben Bernanke has said the central bank could begin to scale back its bond purchases later this year if the economy strengthens. Fed officials typically put greater weight on employment and inflation data than on the GDP figures.

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.

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