Tuesday, August 30, 2016

Inside the GDP Numbers

The U.S. economy grew at a slightly slower pace in the second quarter than previously thought, the Commerce Department said last week: GDP grew at a 1.1 percent annual rate, instead of the previously reported 1.2 percent. The revised figures also shed more light on the overall state of American business.

Corporate profits after taxes, but without inventory valuation and capital consumption adjustments,  has risen for two consecutive quarters, after a sharp decline in 2015. This figure rose 4.9 percent in the second quarter on the heels of an increase of 8.9 percent in the first quarter. Profits had fallen 8.5 percent in 2015.

But the boost in corporate profits hasn’t led businesses to increase spending on big-ticket equipment. Nonresidential fixed investment, a good proxy for business spending on equipment and facilities, fell at a 0.9 percent rate in the second quarter.

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