U.S. second estimate Q2 GDP growth slightly revised down to 2 pct

The revisions to U.S. real GDP growth in the second quarter were quite minimal. The economic growth was downwardly revised by one tick to 2 percent from 2.1 percent in the advance estimate, resulting from an upward revision to consumer spending counter by downgrades to inventories, trade and government.

Consumer spending was upwardly revised to 4.7 percent growth from 4.3 percent, as all categories saw slightly higher spending. Business investment was unrevised, coming in at 0.6 percent fall in the second quarter. There were some revisions to the components; the fall in structures investment in now slightly smaller, and investment in intellectual property products was downwardly revised to 3.7 percent.

Residential investment was downwardly revised a bit to a fall of 2.9 percent from a drop of 1.5 percent. Government spending rose 4.5 percent, down from a previously recorded 5 percent on weaker growth in state and local government spending.

The drag from net exports and inventory disinvestment was also slightly larger. The two components negatively contributed 1.5 percentage points in the first release, and now 1.6 percentage points. Meanwhile, corporate profits for the second quarter recovered by rising 5.3 percent. Nevertheless, that comes after two straight quarters of fall.

In all, the revisions to GDP do not change the picture of the U.S. economy in the second quarter. The economic growth was driven by a solid consumer and government spending, while investment side of the economy was lacklustre.

“In this two-track economy the Federal Reserve is likely to focus more on the investment side when it cuts rates in September. The relentless escalation and détente cycle on trade actions by the White House has damaged business confidence. Taken together with a weaker global economy, the outlook for the U.S. economy has become more fragile”, said TD Economics in a research report.