The U.S. economy performed a little better than first thought in the second quarter, but growth is still flagging while inflation rises, a Commerce Department report showed Aug. 30. GDP grew at an annualized rate of 2.9% in the three months ended June, up from an initial estimate of 2.5%.
The figure was just under Wall Street's consensus forecast of 3%. GDP growth fell sharply from 5.6% in the first quarter and was the weakest pace since the final quarter of 2005.
The lift to GDP came as the Commerce Department reported stronger investment by companies in infrastructure and inventories. At 22.2%, the rise in infrastructure spending was the strongest since the second quarter of 1994. That was revised up from an earlier estimate of 12.7%.
Corporate profits rose for the third consecutive quarter in the three months to June, to yield year-on-year growth of 20.5%. Earnings at financial institutions surged 27.8% while profits in all other sectors went up 15.6%. However, earnings from current production -- corporate profits with inventory valuation and capital consumption adjustments -- increased only by $49.5 billion after going up $175.6 billion in the first quarter.
The department reiterated that compared to the first quarter's booming pace, U.S. consumers had cut back their spending on durable goods while companies had trimmed their investment in equipment and software.
On the inflation side, the Commerce Department left its first estimate for the index of personal consumption expenditures (PCE) unchanged at 4.1% in the second quarter.
The core PCE rate, excluding food and energy costs, was revised down a notch to 2.8% from 2.9%, after rising 2.1% in the first quarter. It was still the rate's fastest pace of growth in more than five years.
Copyright Agence France-Presse, 2006
