August 29, 2018

New estimate raises second quarter economic growth to 4.2%

Economic growth for the second quarter was even better than we thought.

Real US gross domestic product grew at an annualized rate of 4.2% last quarter, the Bureau of Economic Analysis reported Wednesday. That's up from 4.1% in its first estimate.

The new number is based on more complete data, which for the second quarter included higher business investment and lower imports.

It doesn't change the overall picture of how the economy is doing, and it remains the highest rate since the third quarter of 2014.

The robust number can be explained in part by businesses stockpiling inventory and rushing to export their products in advance of expected tariffs on foreign goods imposed by the White House, which have drawn retaliatory duties from China.

Economists broadly expect growth to slow in the coming months, to round out the year at about 3%. Estimates for the current quarter range widely, from a forecast of 2% growth in the third quarter by the Federal Reserve Bank of New York, to 4.6% from the Federal Reserve Bank of Atlanta.

The purchasing manager's index, another indicator of where the economy is headed, declined this month for both manufacturing and non-manufacturing businesses. Morgan Stanley's estimate of business' capital expenditure planning for the next six months rose slightly in July, after falling from an all-time high in March.

The labor market remains strong, with initial jobless claims hovering near their all-time low, although real median earnings are down slightly from the third quarter of last year.

Profits for non-financial corporations also increased in the second quarter, the Bureau reported Wednesday, to $1.3 trillion. That's the highest of the Trump presidency, but still below a record set in the fourth quarter of 2014.

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