WASHINGTON (9/29/14)--The nation's second-quarter gross domestic product was revised for a second time on Friday by the Commerce Department to a real annualized rate of 4.6%, up from 4.2%.
The third estimate was driven by business investment. Growth in outlays on structures was revised up to 12.6% from 9.4%, while spending growth on equipment was bumped up to 11.2% from 10.7% (MarketWatch Sept. 26).
Export totals were revised upward to 11.1% from 10.1%, significantly narrowing the trade deficit in the second quarter. Import spending was also revised up, but only by 0.2% to 11.3%.
There were no changes to overall consumer spending growth, which remained at 2.5%, despite the fact that the increase in real disposable income was revised up by 0.2% to 4.2% (Economy.com Sept. 26). Upward revisions to healthcare spending data were washed out by downward revisions to spending growth on other services.
Corporate profit growth was also revised up to 8.4% from 8%, with the gain concentrated in nonfinancial industries and coming wholly from domestic commerce, according to Moody's.
Second-quarter inflation was also constant, remaining at an annualized rate of 2.3%.
Moody's analysts said that business capital outlays are being encouraged by low borrowing costs, loosening credit standards. Consumers are being buoyed by low debt-service costs, a bullish stock market, expansionary fiscal policy on the state and local levels and the housing recovery, they said.
The ratings and research firm's analysts added, however, that both households and firms appear to be somewhat reluctant to spend. Economists are calling for higher wages to move U.S. GDP growth closer to its historical rate of 3.3%, up from the post-2008 average of about 2%, MarketWatch pointed out.
MarketWatch also warned against optimism concerning the upward revisions and the second-quarter growth. Sluggish growth around the world could hinder U.S. exports, and that a buildup of inventory could encourage companies to decelerate production, the wire service said.
It also pointed out that the U.S. economy grew by 4.5% in the third quarter of 2013 and 4.6% in the fourth quarter of 2011, but that the quarters were followed by slowdowns. Economists polled by MarketWatch are, nonetheless, predicting a third-quarter GDP expansion of 3.2%.
The Commerce Department's initial estimate for second-quarter real annualized GDP growth was 4%.