US economic growth was slightly higher in the second quarter than previously estimated due to upward revisions to consumer spending and business inventories. But a surge in imports kept the recovery on a weak path, a government report showed today.
Gross domestic product growth - which measures total goods and services output within US borders - was revised up to an annualised rate of 1.7% from 1.6%, the Commerce Department said in its final estimate.
That compared to financial markets' expectations for a 1.6% pace and represented a sharp slowdown from the first quarter's 3.7% growth rate.
However, data so far suggest a modest pick-up in economic activity in the third quarter. Although the economy has now grown for four quarters in a row, the recovery from the longest and deepest downturn since the Great Depression has lacked strength to chip away at a 9.6% unemployment rate.
The Federal Reserve last week signaled it was ready to inject more money into the economy to shore up the recovery and avert a damaging downward spiral in prices.
Growth in the second quarter was supported by consumer spending, which was revised up to a 2.2% growth rate, the largest increase in three years, from the previously reported 2% rise.
Consumer spending, which accounts for more than two-thirds of US economic activity, grew at a 1.9% rate in the first three months of the year.
Business inventories increased $68.8 billion rather than the $63.2 billion reported last month. The change in inventories contributed 0.82 percentage points to second-quarter GDP.
Excluding inventories, the economy expanded at a 0.9% pace instead of the 1% rate reported last month.
But a 33.5% jump in imports, which was previously reported as a 32.4% increase, kept growth on a weak trajectory. Analysts believe the surge in imports was likely the result of Chinese exporters rushing to push through goods before the expiration of value added tax rebates.
The growth in imports, which was the strongest in 26 years and eclipsed a 9.1% rise in exports, created a trade deficit that chopped 3.5 percentage points from GDP.
Analysts do not expect the robust import growth pace to continue, which means trade will be less of a drag on growth in the third quarter.
Meanwhile, new government data showed that the number of Americans filing new claims for jobless benefits fell more than expected last week.
Claims for the week to September 25 fell to 453,000, down 16,000 from the previous week's revised figure, according to the Labor Department.
The latest figure was better than most economists' expectations of 457,000 new claims. This was in keeping with recent data showing the ailing US economy was recovering from its worst recession in decades, albeit at a slow pace.
