DATA SNAP: US 2Q GDP Falls Less Than Earlier Estimated

DATA SNAP: US 2Q GDP Falls Less Than Earlier Estimated

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Gross Domestic Product       2Q      2Q      1Q  ! Consensus:    !
Overall GDP Growth        -0.7%   -1.0%   -6.4%  !        -1.2%  !
PCE Price Index           +1.4%   +1.3%   -1.5%  ! Actual:       !
                                                 !        -0.7%  !
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WASHINGTON -(Dow Jones)- U.S. economic output last spring fell less than than previously estimated while inflation gauges remained benign.

Gross domestic product decreased at a 0.7% annual rate from April through June, the Commerce Department said Wednesday, revising its earlier estimated 1.0% drop because business spending in the quarter wasn't as weak as initially thought.

The new estimate was released on the last day of the third quarter, a period analysts think GDP grew, ending a year of contraction in the worst recession since World War II. The first estimate of third-quarter GDP is due out Oct. 29. Economists think the economy expanded modestly July through September; RBS Greenwich Capital Markets this week released an estimate of 2.5% to 3% growth.

The 0.7% decline in GDP during the second quarter was softer than in the darkest days of the slump, when GDP plunged 5.4% in fourth-quarter 2008 and 6.4% in first-quarter 2009. Wall Street had expected the Commerce Department would revise its initial projections for second-quarter GDP downward slightly. Economists surveyed by Dow Jones Newswires forecast a 1.2% decline.

GDP is a measure of all goods and services produced in the economy. The biggest component of GDP - consumer spending - decreased 0.9%, compared to the previously estimated 1.0% drop and the first quarter's 0.6% decrease.

The GDP component that includes spending on housing decreased 23.3%, compared to the previously estimated 22.8% tumble and the first quarter's 38.2% drop.

Internationally, U.S. exports fell by 4.1% instead of 5.0% as earlier reported. Imports decreased 14.7%; earlier, the government said imports fell 15.1%.

Federal government spending rose 11.4%, revised from an earlier estimated 11.0% jump. State and local government outlays increased 3.9%.

Real final sales of domestic product increased 0.7%, beating the earlier estimated 0.4% increase. First-quarter sales fell 4.1%. Real final sales is GDP minus the change in private inventories.

Corporate profits after taxes were revised downward. After-tax earnings rose 5.6% to $1.031 trillion in April through June from the first quarter, the report showed. Earlier, Commerce had estimated a 7.5% increase. Profits in the first quarter surged 16.6%. Year over year, profits were down 19.2% since the second quarter of 2008.

U.S. business spending fell by 9.6%, revised up from a previously reported 10.9% decline. Investment in structures decreased 17.3%. Equipment and software spending decreased 4.9%. Commerce earlier estimated equipment and software spending had fallen 8.4%.

Wednesday's report showed gauges measuring second-quarter price inflation were subdued.

The government's price index for personal consumption increased 1.4% in the second quarter, compared to the previously estimated 1.3% climb and the first quarter's 1.5% fall.

The PCE price gauge excluding food and energy increased an unrevised 2.0% in the second quarter, compared to the first quarter's 1.1% increase.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased an unrevised 0.5% in the second quarter, compared to the first quarter's 1.4% dip.

The chain-weighted GDP price index as expected posted no increase the second quarter. The chain-weighted GDP price index rose 1.9% in the first quarter.