The U.S. economy in the second quarter contracted at slower pace earlier estimated by the Department of Commerce.
The Commerce Department today released its final estimated for the second quarter which showed gross domestic product fell at a 0.7 percent annual rate instead of the 1.0 percent decline reported last month. Improved consumer and business spending cushioned the impact of a record decline in inventories, according to a the report.
The second-quarter contraction market the first time since the government began keeping records in 1947 that real Gross Domestic Product has shrunk for four consecutive quarters.
The shallow decline in activity in the second quarter reflected more moderate drops in consumer spending and business investment than previously estimated. Consumer spending, which normally accounts for over two-thirds of U.S. economic activity, fell at a 0.9 percent rate in the second quarter — smaller than the previously estimated 1.0 percent decline. Spending rose at a 0.6 percent rate in the previous quarter.
Business investment fell at a 9.6 percent rate in the second quarter instead of 10.9 percent, reflecting slightly better demand for software than previously projected. It skidded 39.2 percent in the first quarter.
Weak domestic demand meant businesses continued to reduce their stock of unsold goods. Business inventories plunged by a record $160.2 billion in the second quarter rather than the $159.2 billion drop estimated by the government last month. Stockpiles of unsold goods fell by $113.9 billion in the first quarter.
The drop in inventories subtracted 1.42 percentage points from second-quarter GDP, the department said. Excluding inventories, GDP rose 0.7 percent in the second quarter compared to a 4.1 percent decline in the first quarter.
The department said corporate profits after taxes rose 0.9 percent, much lower than the 2.9 percent it estimated last month. It compared to analysts’ forecasts for 3.0 percent growth.
After tax corporate profits increased 1.3 percent in the first quarter.
Investment in nonresidential structures fell at a 17.3 percent rate compared to a 43.6 percent drop in the January-March quarter. Residential investment, at the heart of the worst U.S. recession in seven decades, dropped at a 23.3 percent rate in the second quarter. It fell 38.2 percent in the first quarter.
