Second-quarter U.S. growth was revised higher to a 3.3-percent annual rate from the 2.8 percent previously reported, the U.S. Commerce Department reported.
It's the slowest growth in five quarters. The economy grew at a 4.5-percent rate in the first quarter and has grown 4.8 percent in the past four quarters.
The second revision to real gross domestic product (GDP) in the April-through-June quarter was largely due to a decrease in estimated imports, an increase in estimated inventory accumulation, and an increase in estimated exports.
Final sales of domestic product increased 2.5 percent, up from 2.1 percent in the earlier estimate.
Economists were expecting an upward revision to 3.1 percent, according to a survey conducted by CBS MarketWatch. "It appears as if the soft spot may not have been so soft after all," said Drew Matus, an economist for Lehman Bros.
Bonds extended their losses on the report, which indicated moderately stronger growth than anticipated. The dollar strengthened. Stock futures were little changed.
The U.S. government will provide its first estimate of third-quarter growth on Oct. 29. Economists are expecting growth of about 3.7 percent.
"Coupled with our forecast for a substantial pickup in [the third quarter] to over 4 percent, we believe these data strongly support our outlook (and the Fed's) that the economy is in good shape and will be healthy enough to support continued measured rate hikes," said Steve Stanley, chief economist for RBS Greenwich Capital.
In the second-quarter's GDP report, inflation measures were unrevised. The core personal consumption expenditure price index increased at a 1.7-percent annual rate in the quarter. The broader gross domestic purchases price index increased 3.5 percent.
In current dollars, nominal GDP increased 6.6 percent to U.S. $11.66 trillion annualized.
Corporate profits were revised slightly higher. Before-tax profits increased 0.7 percent at a quarterly rate to $1.17 trillion annualized, while after-tax profits fell 0.7 percent. In the past year, before-tax profits are up 19 percent and after-tax profits are up 18.5 percent. Personal incomes increased 2.4 percent annualized to $9.58 trillion annualized.
As in the earlier estimates, business investment was the biggest source of growth, revised slightly higher to a 12.5-percent increase, including a 14.2-percent gain in investments in equipment and software. Investments in business structures increased 6.9 percent.
Capital spending was revised higher in each of the three passes at second-quarter GDP, noted Robert Brusca, chief economist for FAO Economics. "It's encouraging," she said.
Investments in residences soared at a 16.5-percent rate.
Meanwhile, consumer spending slowed to a 1.6-percent rate, the slowest since the depths of the recession in 2001. Spending on durable goods fell 0.3 percent, while spending on services increased 2.7 percent. Spending on nondurable goods increased 0.1 percent.
Ms. Brusca said the strength of spending on services "enhances the chances you'll get job growth," because productivity in services is growing slower than in manufacturing.
Net imports subtracted 1.1-percentage points from growth. Imports grew 12.6 percent while exports grew 7.3 percent. (CBS.MarketWatch.com)
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