US second-quarter GDP revised higher amid robust consumer spending

On September 30, the US Commerce Department's Bureau of Economic Analysis reported that the economy expanded at a 2.2% annualized rate in the second quarter, higher than the previously estimated 1.5% growth. This upward revision was driven by strong consumer spending and business investment in AI infrastructure. Economists surveyed by Reuters had anticipated no change in the growth rate. The first quarter's growth was revised upward from 2.1% to 2.5%.

Consumer spending, which constitutes over two-thirds of the economy, increased at a 3.8% rate in the second quarter, up from the 3.4% figure initially reported. January-March quarter consumer spending grew at a 0.7% rate. Despite high inflation, particularly in gasoline prices, consumer confidence fell to a near 12-1/2-year low according to a Conference Board survey in September.

Nonetheless, consumer spending remained robust in the third quarter, thanks to an AI-driven stock market rally and households relying on savings. Business spending on equipment also grew at double-digit rates. Final sales to private domestic purchasers, excluding trade, inventories, and government spending, rose at a 4.6% pace in the second quarter, revising up from the 4.2% growth initially estimated.

From the income perspective, the economy expanded at a 2.6% rate in the second quarter, revised up from the previously estimated 2.2% pace. This rise was attributed to strong corporate profits. When considering the income side, the economy grew at a 2.6% pace, up from the initially estimated 2.2%. The average of GDP and GDI, a more comprehensive measure of economic activity, grew at a 2.4% rate last quarter.

GDP and GDI were previously estimated to have increased at a 1.8% rate. Output also increased at a 2.5% rate in the first quarter. In response to inflation, the Federal Reserve raised interest rates for the first time in three years earlier in the month.