U.S. Q2 GDP Growth Revised Down to 3.8%

Sep 27, 2007 - The Department of Commerce released its final report on second quarter gross domestic product Thursday morning, showing that the annual rate of GDP growth in the quarter was downwardly revised a little more than economists had expected.

The report showed that GDP growth in the second quarter was revised down to 3.8 percent from the preliminary estimate of 4.0 percent growth. Economists had expected GDP growth for the quarter to be revised down to 3.9 percent.

The downward revision to the second quarter growth reflected an upward revision to imports and a downward revision to non-residential construction. An upward revision to spending on equipment and software helped to limit the size of the downward revision.

Despite the downward revision, the GDP growth in the second quarter still represents a significant acceleration from the 0.6 percent growth that was seen in the first quarter.

The acceleration came amid a downturn in imports as well as upturns in federal government spending and in private inventory investment. Faster export, non-residential construction, and equipment and software spending growth also contributed to the acceleration.

However, the acceleration compared to the first quarter was partly offset by a notable deceleration in the pace of consumer spending growth, which slowed to 1.4 percent in the second quarter from 3.7 percent in the first quarter.

While the report also showed a slowdown in the pace of core consumer price growth compared to the first quarter, the increase in core prices was revised up to 1.4 from the preliminary reading of 1.3 percent growth. Core consumer prices rose 2.4 percent in the first quarter.

Nonetheless, the data is likely to be seen as old news, with many traders and economists focusing on more recent data to get an indication of the broader economic impact of the recent problems in the credit market.

Last week, the Federal Reserve announced its decision to cut interest rates by 50 basis points in an effort to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in the financial markets.

The Federal Open Market Committee, the policy-setting arm of the Federal Reserve, is scheduled to make its next decision on interest rates after a two-day meeting in late October.