The American economy grew faster than previously estimated in the second quarter amid strong consumer spending and business investment. Second-quarter GDP growth has been revised up to a 3.8% rate with consumer spending accounting for the growth upgrade. In addition, weekly claims for unemployment benefits dropped 14,000 to 218,000.
U.S. stocks fell as investors viewed the data as not supportive of further U.S. Federal Reserve interest rate cuts.
Lucia Mutikani for Reuters:
The economy’s resilience was underscored by other data showing strong demand by business for equipment in August and a drop in first-time applications for unemployment benefits last week as companies hoard workers.
Gross domestic product increased at an upwardly revised 3.8% annualized rate last quarter, the fastest pace since the third quarter of 2023, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its third GDP estimate.
The economy was previously reported to have grown at a 3.3% pace in the second quarter. Economists polled by Reuters had expected GDP growth would be unrevised. A front-loading of imports as businesses rushed to beat import duties, which boosted the nation’s average tariff rate to its highest level in a century, depressed GDP in the January-March quarter. GDP snapped back last quarter as the flow of foreign goods eased.
A sharp upward revision to consumer spending, which accounts for more than two-thirds of the economy, accounted for the bulk of the upgrade to GDP last quarter. Spending is now estimated to have increased at a 2.5% pace, revised up from the previously reported 1.6% rate. It increased at a 0.6% rate in the first quarter, a slight raise from the 0.5% pace published last month.
There were also upward revisions to business spending on intellectual property products, now estimated to have expanded at a 15.0% rate, rather than the 12.8% estimated last month.
Growth in business investment in equipment was revised up to a 8.5% rate from the previously reported 7.4% pace.
A separate report from the Labor Department showed initial claims for state unemployment benefits dropped 14,000 to a seasonally adjusted 218,000 for the week ended September 20. Economists had forecast 235,000 claims for the latest week.
MacDailyNews Take: Obviously, strong U.S. consumer spending is a boon for Apple in its number one market.
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