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

PEDESTRIANS pass in front of American Apparel LLC and J.Crew Group Inc. stores at the Lincoln Road Mall in Miami Beach, Fla. / BLOOMBERG NEWS/SCOTT MCINTYRE
PEDESTRIANS pass in front of American Apparel LLC and J.Crew Group Inc. stores at the Lincoln Road Mall in Miami Beach, Fla. / BLOOMBERG NEWS/SCOTT MCINTYRE

WASHINGTON – 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, St. Petersburg, Fla.-based chief economist for Raymond James Financial Inc., said about household spending. “The U.S. economy is generally in good shape” for the second half while “conditions around the rest of the world are still sluggish.”

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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.

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