The Economy

U.S. Growth Revised Upward to 1.4% for Q2

Positive growth in net exports and business investment helped move the government's final second-quarter GDP estimate up from 1.1%.
Matthew HellerSeptember 30, 2016

The U.S. economy grew at a faster rate in the second quarter than previously estimated, reflecting in part improvement in net exports and business investment.

In its final estimate of second-quarter growth, the Commerce Department on Thursday said GDP rose to 1.4%, up from last month’s 1.1% estimate. Economists surveyed by The Wall Street Journal expected revised GDP growth at a 1.3% pace for the April to June period.

GDP has rebounded from the first quarter’s 0.8% pace, but still lags behind the roughly 2% annual rate averaged since the recession ended in mid-2009. The second-quarter revision incorporated data that showed businesses cut investments in buildings and equipment less than the government previously estimated, while putting more money into research and development.

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“It now appears that growth is slowly making its way back on to firmer ground,” Michael Feroli, an economist at JPMorgan in New York, told Reuters.

A measure of business spending, nonresidential fixed investment, rose at a 1% rate versus the prior estimate of a 0.9% decline. It was the first gain since the third quarter of last year and, according to Reuters, suggests “the worst of the energy sector-led slump in business investment might be over.”

Consumer spending, which makes up more than two-thirds of U.S. economic activity, continued to be robust, rising at a 4.3% annual rate, while growth in exports outstripped that of imports enough to boost GDP by the most since the third quarter of 2014.

Inventory investment — one of the most volatile components of GDP — subtracted 1.2 percentage points from GDP growth, while residential investment contracted following eight straight quarters of gains.

“Today’s report underscores that there is more work to do, and the President will continue to take steps to strengthen economic growth and boost living standards by promoting greater competition across the economy; supporting innovation; and calling on Congress to increase investments in infrastructure and to pass the high-standards Trans-Pacific Partnership,” the White House said in a news release.