GDP growth slows to 1.1% in second quarter
A flood of imports cut U.S. GDP growth to 1.1% in the second quarter and the Commerce Department revised its first-quarter GDP growth estimate to 5% from 6.1%.The key sectors for the technology industry all improved sharply in the second quarter. Spending for business equipment and software rose 2.9% after a 2.7% drop in the previous quarter. This turnabout was heavily concentrated in motor vehicles, with annual growth in core IT equipment spending rising to a 12% from a 6% annual pace. Similarly, growth in consumer durables improved to 2.4% from a decline of 6.3%, and goods export growth rose to 15.2% after falling 3.4%.
Overall, the disappointing report will contribute marginally to lower confidence and spending for the rest of the year. Nonetheless, a reasonably typical recovery is still expected through 2003. The usual lagging sectors-consumer nondurables and state and local government-both declined from the first quarter, while the typical leading sectors-consumer durables, business investment, and inventory-rose sharply, and two often random sectors-exports and the federal government-also increased substantially and are likely to keep expanding.
Last year's GDP growth was revised to 0.3% from 1.2%. This was no surprise after recent downward revisions to 2001 employment, personal income, consumer spending, and manufacturing shipments. The recent recession was made longer and deeper, now beginning in January 2001 instead of July.
The beginning of the recovery is still set in the fourth quarter of last year with now stronger growth in that quarter offset by weaker growth in the first quarter of 2002.