US Second-Quarter Growth Rate Cut to 2.1% on Business Spending
The government’s main measure of US economic activity in the second quarter was revised lower, as more moderate business investment than initially reported outweighed stronger consumer spending.
(Bloomberg) -- The government’s main measure of US economic activity in the second quarter was revised lower, as more moderate business investment than initially reported outweighed stronger consumer spending.
Gross domestic product rose at a revised 2.1% annualized pace in the second quarter, below the government’s previous estimate. The downward revision to GDP reflected less inventory and nonresidential fixed investment. Household spending, the engine of the US economy was revised higher, to a 1.7% pace.
A gauge of the income generated and costs incurred from producing goods and services — gross domestic income — rose 0.5% after contracting in the prior two quarters, Bureau of Economic Analysis figures showed Wednesday.
The average of the two measures rose 1.3%, the most in nearly a year. The group that officially determines the timing of business cycles watches the average closely.
Bolstered by the enduring strength of the labor market and resilient consumers, the US economy continues to power ahead. Forecasters generally expect growth to accelerate in the third quarter on the back of a pickup in consumer spending.
While that strength has led many to push out their recession forecasts — or scrap them altogether — a sustained acceleration in activity could force the Federal Reserve to step on the brakes harder to ensure inflation continues to fall.
Corporate Profits
The report also includes the government’s first estimate of corporate profits in the quarter. Adjusted pretax corporate profits fell 0.4% in the April to June period, reflecting a drop at financial corporations. From a year earlier, profits were down 6.5%.
A measure of US profit margins widened. After-tax profits as a share of gross value added for nonfinancial corporations, a measure of aggregate profit margins, rose in the second quarter to 14.3% from 13.8%.
Meanwhile, key inflation gauges watched closely by the Fed were revised lower. The personal consumption expenditures price index excluding food and energy rose at a 3.7% pace in the second quarter, the slowest in more than two years.
Separate figures Wednesday showed a widening in the July merchandise trade deficit, while retail inventories rose less than the prior month.
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