Economic growth came in at a 1.4 percent annual rate in the second quarter, the Bureau of Economic Analysis reported Thursday in its third and final estimate of gross domestic product, up from a previously estimated 1.1 percent.
The news that final growth was a relatively weak 1.4 percent is nevertheless a partial relief in that the revised number was slightly better than the upward revision to 1.3 percent private-sector economists.
Nevertheless, second-quarter GDP growth was only slightly higher than the first quarter’s anemic 0.8 percent mark, and it is well off the pace that the Obama administration and the Federal Reserve had hoped for earlier in the year, and well below the historical average for growth.
Thursday’s upward revisions were largely driven by greater business investment than expected, which is welcome news because business investment has slowed enough in recent quarters to concern policymakers.
Along with an increase in business investment, still-strong consumer spending and improved exports drove the slight acceleration in GDP growth in the second quarter. Stronger net exports is a sign that the pressures put on U.S. manufacturers in the past two years by the weakened dollar, a key factor restraining growth, might be letting up.
Nevertheless, some underlying details from Thursday’s report were not encouraging.
For example, Gross Domestic Income, which represents the economy in terms of total income rather than sales, actually shrunk. GDI should equal GDP theoretically, but the two diverge because statistics-gathering is not perfect. Averaging GDI and GDP, growth actually slowed in the second quarter to 0.6 percent annually, the fourth slowdown in a row.
Part of what held growth back, however, was an unusual decrease in the amount of inventories added by businesses. Inventory is usually not suggestive of future growth and reversed in the months ahead.
Private-sector economists still see growth picking up in the second half of the year.
