Washington: The US economy grew slightly more than previously reported in the second quarter, helped by consumer spending and export growth that was stronger than earlier estimated, according to a government report on Thursday that pointed to slow growth rather than a recession.
Gross domestic product (GDP) grew at annual rate of 1.3%, the commerce department said in its third and final estimate for the quarter, up from the previously estimated 1.0%.
The revision was a touch above economists’ expectations for a 1.2% pace and took GDP growth back to the government’s original estimate of 1.3%. The economy expanded at a 0.4% rate in the first three months of the year.
Pedestrians holding shopping bags walk on Fifth Avenue in New York, US. Photo: Bloomberg
While the expenditure side of the economy showed severe weakness in the first half, economic activity as measured by income fared a little better. Gross domestic income rose at a 1.3% rate in the second quarter after increasing 2.4% in the first quarter.
The report also showed after-tax corporate profits rising at a 4.3% rate in the second quarter, the largest increase in a year, instead of 4.1%. Profit ticked up 0.1% in the first quarter.
Political haggling in Washington over budget policy and a deepening debt crisis in Europe have eroded confidence, leaving the US economy on the brink of a new recession.
There is cautious optimism the economy will skirt another downturn as factory output continues to expand, although at a slower pace than earlier in the recovery, and businesses maintain their appetite for spending on capital goods.
Details of the GDP revisions also were consistent with an economy that is on a slow growth track rather than sliding back into recession.
Consumer spending growth was revised up to a 0.7% rate from 0.4%. The increase in spending, which accounts for more than two-thirds of US economic activity, was still the smallest since the fourth quarter of 2009.
Export growth was stronger than previously estimated, rising at a 3.6% rate instead of 3.1%. Imports increased at a 1.4% rate rather than 1.9%.
That left a smaller trade deficit, and trade contributed 0.24 percentage point to GDP growth.
Businesses accumulated less stock than previously estimated in the quarter, which should support growth in the July-September quarter. Business inventories increased $39.1 billion instead of $40.6 billion, cutting 0.28 percentage point from GDP growth during the quarter.
Excluding inventories, the economy grew at a 1.6% pace instead of 1.2%.
Business spending was revised to a 10.3% rate from 9.9% rate as investment in nonresidential structures offset a slight slowdown in outlays in equipment and software. Spending on nonresidential structures was the fastest since the third quarter of 2007.
The GDP report also showed inflation pressures remaining elevated during the quarter, with the personal consumption expenditures price index rising at a revised 3.3% rate. That compared to 3.9% in the first quarter.
The core PCE index closely watched by the US Federal Reserve advanced at a 2.3% rate, the largest increase since the second quarter of 2008. It was revised up from 2.2%.