Good Summary on Economy

U.S. Growth Revised Down Again

The U.S. government revised downward for the second time its estimate of economic growth in the first quarter.

Gross domestic product, the total output of the nation's goods and services, rose at a 2.7% annual rate from the fourth quarter of last year, the Commerce Department reported. That was down from an original estimate of 3.2% in April and from May's downward revision to an estimate of 3%. It was also down from the fourth quarter, when GDP grew at an annual rate of 5.6%.
Consumer spending, a key engine of growth for the economy, was less robust than previously thought. Spending rose by 3.0%, down from a previous estimate of 3.5%. That revision suggested the economy had less momentum heading into the second quarter.

The report also showed that companies had built inventories by more in the first quarter than earlier estimated, suggesting that they may not have had to increase output by as much to meet demand in the second quarter.

"I don't think the report is terrible, but it's not as favorable as we thought," said Michael Feroli, an economist at J.P. Morgan. For the second quarter, which will end Wednesday, Mr. Feroli looks for GDP growth of 4%, but said Friday's report clouded that estimate. A survey conducted by The Wall Street Journal in early June showed that economists, on average, expected GDP to grow at a 3.6% annual rate in the second quarter.

On a positive note, first-quarter corporate profits were revised up, rising by 8% from a previously reported 5.5% increase. Year over year, earnings were up 34%. Many economists look to strong profit growth—which looks to have continued in the second quarter—to overcome hesitancy by many businesses to spend and hire.

Separately, the Reuters/University of Michigan index of consumer sentiment climbed to 76.0 for June, compared with a preliminary reading of 75.5 made earlier in the month and 73.6 in May. The reading was the best since January 2008.

source:wsj