Washington: The US economy expanded more in the second quarter than previously estimated, reflecting a smaller drag from business spending on structures and equipment.
Gross domestic product rose at a 1.4 per cent annualised rate, compared with a prior estimate of 1.1 per cent, Commerce Department figures showed Thursday. Gross domestic income, which reflects all the money earned by consumers, businesses and government agencies, was revised to show a 0.2 per cent drop rather than a gain.
Households are doing the heavy lifting for the economy, making up for tepid business investment and lacklustre demand from overseas. On the heels of robust hiring and nascent wage gains, consumer spending is projected again to drive growth in the third quarter.
“It’s clearly been enough to carry us through,” Scott Brown, chief economist for Raymond James Financial Inc. in St. Petersburg, Florida, said about household spending. “The US economy is generally in good shape” for the second half even as “conditions around the rest of the world are still sluggish.”
Household consumption, which accounts for about 70 per cent of the economy, was revised to 4.3 per cent from a prior estimate of 4.4 per cent.
The upward revision to GDP also reflected a smaller drag from inventories and higher exports.
The median forecast in a Bloomberg survey called for a 1.3 per cent gain in GDP. Economists’ estimates for the value of all goods and services produced ranged from 0.9 per cent to 1.7 per cent.
The latest estimate is the last of three for the quarter before annual revisions next year. The economy grew at a 0.8 per cent pace from January through March.
Investment in non-residential structures, including office buildings and factories, fell at a 2.1 per cent rate, rather than a previously reported 8.4 per cent drop. Spending on equipment fell at a 2.9 per cent pace, compared with 3.7 per cent in the prior report.
Combined with a 9 per cent increase in intellectual property products, non-residential fixed investment advanced at a 1 per cent annualised pace in the second quarter. It was previously reported as falling 0.9 per cent.
Final sales to private domestic purchasers rose at a 3.2 per cent rate in the April through June period, revised from a previously reported 3 per cent pace. The category reflects consumer and business spending and excludes government purchases, exports and inventories.
The decline in gross domestic income compares with a prior estimate of a 0.2 per cent gain and was due to a downward revision to state and local tax receipts as well as collections from oil and gas producers.
Corporate profits
Before-tax corporate profits fell 4.3 per cent in the second quarter from the same time last year, compared with a 4.9 per cent drop previously reported, according the Commerce Department. It was the fifth consecutive decline and the worst streak since the end of the recession in mid-2009.
The economy will grow at a 2.8 per cent rate in the third quarter before cooling to 2.4 per cent in the last three months of the year, according to the median forecast of economists surveyed by Bloomberg from Sept. 2 to Sept. 7.
