The U.S. economy grew at a rate of 1.3% during the second quarter, faster than originally estimated last month, as exports and spending on services helped boost gross domestic product. The Commerce Department’s earlier figures had GDP gaining 1% during the April-June period.
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However, exports and business spending might take a hit as growth in global markets slows. “The third quarter did get off to a better start but there’s been a loss of momentum in the economy,” said Jim O’Sullivan, chief economist at MF Global Inc. in New York. “With consumer confidence down and equity markets down, the best hope is sluggish growth for the next few months.”
The Commerce Department’s report this morning — the third and final for the quarter — also upwardly revises the pace of investment in non-residential construction projects between April and June, but decreased state and local government spending partially offset those gains.
Consumer spending rose at a 0.7% annual rate, up from an earlier reported 0.4% gain, while household purchases climbed 2.1% in the second quarter. Exports also gained, narrowing the gap between exports and imports and adding 0.24% to second-quarter growth, up from a previous estimate of a 0.09% contribution.
This morning’s report also downwardly revised some previously reported figures, including business investment in equipment and software, which was previously estimated to have risen 7.9% during the second quarter. The new report has it rising at a 6.2% annual rate. Meanwhile, inventories also subtracted from second-quarter growth more than originally thought, declining 0.28% rather than 0.23%.
Wages and salaries rose by $78.7 billion during the second quarter, compared to an earlier estimate of $80.2 billion. Real disposable income, which adjusts for inflation after taxes, rose 0.6% compared to an earlier estimate of a 1.2% annual rate. Corporate earnings rose 3.3% from the previous quarter.