From the GDP report:
Within the report, however, there were signs that American businesses were managing to ride out the slowdown. After-tax corporate profits were up for a second consecutive quarter, rising 1.7 percent after a 2 percent gain in the first three months of the year. And while overall business investment was revised downward, falling at a 2.6 percent rate, spending on new equipment and software was revised upward to a 3.1 percent pace, the first gain since the third quarter of 2000.
U.S. GDP growth slows in second quarter
Thursday August 29, 10:05 am ET
(Recasts first paragraph)
WASHINGTON, Aug 29 (Reuters) - The pace of U.S. economic growth slowed sharply in the second quarter, the government confirmed on Thursday, but businesses showed signs of a renewed willingness to invest and improved bottom lines.
Gross domestic product, the broadest measure of goods and services produced in the United States, grew at a 1.1 percent annual rate, down from a 5 percent rate for the first quarter, the Commerce Department said. It was the department's second estimate for the spring quarter, and was the same as the initial estimate, which it made in July.
Within the report, however, there were signs that American businesses were managing to ride out the slowdown. After-tax corporate profits were up for a second consecutive quarter, rising 1.7 percent after a 2 percent gain in the first three months of the year. And while overall business investment was revised downward, falling at a 2.6 percent rate, spending on new equipment and software was revised upward to a 3.1 percent pace, the first gain since the third quarter of 2000.
The reading was close to Wall Street analysts' expectations. In a poll by Reuters, second-quarter GDP was expected to be revised up to a 1.2 percent rate.
The GDP report drew little market reaction.
"The second quarter slowed down a lot from (the first quarter) and that's a story we knew when the numbers were initially reported," said Stephen Stanley, senior market economist with Greenwich Capital Markets.
In a positive sign for the lackluster recovery from last year's recession, the report showed businesses built up inventories for the first time since the fourth quarter of 2000. Inventories grew at a $7.3 billion annual rate, revised upward from the previous estimate of a $1 billion pace and contributing strongly to the quarter's overall growth rate.
Inflation remained contained in the report, as well. The price index for consumer spending increased at a 2.5 percent rate, the same as in the initial estimate.
The economy fell into a recession in the first quarter of 2001, contracting slightly through the third quarter of the year. While it has been growing since the final quarter of 2001, its pace has been unsteady, leading to worries of a potential "double dip" recession after this summer's stock market woes.
Federal Reserve Chairman Alan Greenspan is scheduled to speak on the economy on Friday at an annual retreat of bankers and monetary policymakers in Jackson Hole, Wyoming. When the Fed last met to discuss interest rate policy, it said that the risks to the economy were weighted toward weakness.
The Commerce Department is set to release its final estimate of second-quarter growth on Sept. 27. |
