U.S. economy expanded at revised 1.4% rate in 2nd quarter

Bloomberg

The U.S. 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 percent annualized rate, compared with a prior estimate of 1.1 percent, 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 percent drop rather than a gain.

Households are doing the heavy lifting for the economy, making up for tepid business investment and lackluster 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 U.S. 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 percent of the economy, was revised to 4.3 percent from a prior estimate of 4.4 percent.

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 percent gain in GDP. Economists’ estimates for the value of all goods and services produced ranged from 0.9 percent to 1.7 percent.

The latest estimate is the last of three for the quarter before annual revisions next year. The economy grew at a 0.8 percent pace from January through March.

Investment in nonresidential structures, including office buildings and factories, fell at a 2.1 percent rate, rather than a previously reported 8.4 percent drop. Spending on equipment fell at a 2.9 percent pace, compared with 3.7 percent in the prior report.

Combined with a 9 percent increase in intellectual property products, non-residential fixed investment advanced at a 1 percent annualized pace in the second quarter. It was previously reported as falling 0.9 percent.

Final sales to private domestic purchasers rose at a 3.2 percent rate in the April through June period, revised from a previously reported 3 percent 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 percent gain and was due to a downward revision to state and local tax receipts as well as collections from oil and gas producers.

Before-tax corporate profits fell 4.3 percent in the second quarter from the same time last year, compared with a 4.9 percent drop previously reported, according the 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 percent rate in the third quarter before cooling to 2.4 percent in the last three months of the year, according to the median forecast of economists surveyed by Bloomberg from Sept. 2 to Sept. 7.