US economic growth was a touch weaker in the second quarter than first thought, the government said today, as consumers spent less than estimated and businesses built inventories slightly.
US gross domestic product, a measure of all goods and services produced within US borders, grew at a revised 3.3% annual rate in the April-June period after a 3.8% first-quarter increase, the Commerce Department said.
In its first snapshot a month ago, the department had put second-quarter growth at a 3.4% pace, a figure economists had expected to be nudged up to 3.5%.
The department also said inflation was a bit lower than first reported, with the price index for consumer spending rising at a 3.2% annual rate, compared with an initial 3.3% estimate. In addition, the core price index, which strips out volatile food and energy costs, moved up just 1.6%, down from 1.8%.
The report offered the first look at corporate profits for the quarter. Profits after tax rose a solid 6.9%, after a 0.1% dip in the first quarter. Business inventories rose at a $2.6 billion annual rate in the second quarter. That represented a sharp slowdown in inventory accumulation that took nearly 2 percentage points off of growth.
However, a month ago the department had said inventories had actually dropped for the first time since the second quarter of 2003.
The revised figures showed consumer spending advanced at a solid 3% pace, a bit softer than the 3.3% rise first reported. Business investment spending was also a bit weaker, although it still climbed at a healthy 8.4% rate.
In addition, a small rise in imports helped meet business and consumer demand. A month ago the department said imports, which subtract from domestic growth, had fallen.
Exports, however, were somewhat stronger than first thought, as was government spending - factors that helped temper what would otherwise have been a larger downward revision to economic growth.
Overall, the report did little to alter the view of the economic landscape, as strong demand left inventories lean, laying the groundwork for further production gains. Economists widely expect the economy to gain steam in the second half of the year, although some have ratcheted back forecasts for third-quarter growth slightly in the wake of Hurricane Katrina.
While analysts say much of the storm's impact on economic growth should prove fleeting as activity picks up amid rebuilding, they warn that uncertainties over how high oil and petrol prices might soar present a wildcard in the outlook.
