U.S. gross domestic product (GDP) grew at an annualized rate of 3 percent in the second quarter, showing an impressive performance for the economy through an elevated interest rate environment set by the Federal Reserve.
Three percent growth in the Commerce Department’s third estimate of GDP performance confirmed the second estimate, which also came in at 3 percent. Both were up from 1.6-percent growth in the first quarter.
Corporate profits, adjusted for inventories and capital use, were up $132.5 billion in the second quarter, marking an upward revision of $74.9 billion from the last estimate. Profits of companies have surged in the aftermath of the pandemic, both in dollar terms and as a share of value in the economy.
Profits of domestic nonfinancial corporations were revised up by $79.6 billion to $108.8 billion, while those of financial companies were revised down by $4 billion to hit an increase of $42.5 billion in the second quarter.
The latest GDP figures included upward revisions in inventory investments and government spending, offset by reductions in exports and fixed investments, the Commerce Department said.
The biggest contributors to GDP growth in the second quarter were nondurable goods manufacturing, finance and health care. Food services, educational services and mining output were the largest detractors from the overall number.
The Federal Reserve has recently made a shift in monetary policy, cutting interest rates for the first time in years at its latest meeting earlier this month. Monetary policy works at a lag relative to employment conditions in the economy, but markets have already responded positively as capital inflows into equities have been increasing.
The 0.2-percentage point difference between the GDP’s third estimate and its advanced estimate represents a concern for economists in light of the Federal Reserve’s “data dependency” over the course of the pandemic, which differs from the more programmatic approach of previous Fed administrations.
“The increased frequency and size of data revisions underscores the dangers of ‘data dependency’ in driving policy,” UBS economist Paul Donovan wrote in a Thursday commentary.
