Second Quarter GDP Shows Smaller Than Previously Estimated Drop

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While the Commerce Department released a report on Wednesday showing a continued decrease in gross domestic product in the second quarter, the pace of decline in economic activity was unexpectedly slower than the preliminary estimate.

The report showed that GDP decreased at an annual rate of 0.7 percent in the second quarter compared to the preliminary estimate of a 1.0 percent decrease. Economists had been expecting the drop in GDP to be revised to show a 1.2 percent decrease.

An upward revision to non-residential fixed investment contributed to the unexpected upward revision to GDP in the second quarter.

With the revision, the modest decrease in GDP in the second quarter marks a substantial deceleration from the 6.4 percent drop reported for the first quarter.

The Commerce Department said that the smaller decrease in GDP in the second quarter primarily reflected much smaller decreases in non-residential fixed investment and exports.

An upturn in government spending, a smaller decrease in private inventory investment and a smaller decrease in residential fixed investment also contributed to the slower pace of decline in GDP in the second quarter.

At the same time, the report showed that consumer spending in the second quarter fell 0.9 percent following a 0.6 percent increase in the first quarter. The drop in consumer spending in the second quarter was revised from the 1.0 percent decrease reported last month.

The Commerce Department also said that its reading on core consumer prices, which exclude food and energy prices, was unchanged the preliminary estimate, showing a 2.0 percent annual rate of growth in the second quarter.

In other economic news, private sector employment continued to decrease in September, according to a report released by payroll processor Automatic Data Processing, Inc. (ADP) on Wednesday, although the pace of decline in jobs fell to its slowest rate since July of 2008.

The report showed that non-farm private employment fell by 254,000 jobs in September following a revised decrease of 277,000 jobs in August. The drop in jobs in the previous month was revised from the loss of 298,000 jobs originally reported.

ADP noted that employment losses have diminished significantly over the last two quarters, although it said that employment is likely to decline for at least several more months due to the fact that the labor market trails overall economic activity.

While the Commerce Department released a report on Wednesday showing a continued decrease in gross domestic product in the second quarter, the pace of decline in economic activity was unexpectedly slower than the preliminary estimate. The report showed that GDP decreased at an annual rate of 0.7 percent in the second quarter compared to the preliminary estimate of a 1.0 percent decrease. Economists had been expecting the drop in GDP to be revised to show a 1.2 percent decrease. (Market News Provided by RTTNews)