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GDP bounced back in the second quarter

Anyone who was worried by that nasty first-quarter GDP report can breathe easy.

The economy grew at a strong 4.0 percent annual pace in the second quarter, the Commerce Department reported Wednesday. The report shows that the economy bounced back readily from a weak first quarter, in which real GDP shrank at an annual rate of 2.1 percent, according to revised estimates.

The report also shows the economy grew far more quickly than expected. Economists surveyed by Bloomberg had predicted a growth rate of around 3 percent.

A large share of the rebound came from business inventory investment. While in the first quarter, businesses cut back their stores of products ready to sell to customers, they stocked up again this quarter. Inventories contributed nearly 1.7 of those 4 percentage points of growth.

Consumers also spent more, particularly on goods. Those purchases of goods accounted for 1.4 percentage points of growth. That's a fast acceleration from the first quarter and may signal that the soft consumer spending reading in that quarter's GDP report was a result of winter weather keeping people indoors and away from stores. Increased state and local government spending, as well as more spending on housing, also helped speed GDP's growth last quarter.

The encouraging estimate also comes as the Federal Reserve's Open Market Committee concludes its most recent two-day policy-making meeting.

Of course, this is only the department's first estimate of economic growth for the second quarter. Revisions can substantially change these estimates as the department gets more information.