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GDP Growth Softens Slightly In 2Q

Statistics released on Friday (Aug. 26) by the Bureau of Economic Analysis show that the U.S. economy grew a bit less in the second quarter of 2016 than had been estimated previously.

Gross domestic product grew by 1.1 percent in the latest tally, the second estimate that follows the “advance” estimate that was released in July, which projected 1.2 percent growth.

Still, that represents a quickening of expansion, when measured against the first quarter of this year, where GDP was up 0.8 percent.

Despite the slight moderation, one of the main drivers of GDP growth was personal consumption expenditures, reflecting continued traction in consumer spending, up 4.4 percent and revised from earlier reports of 4.2 percent, which was enough to offset slight declines in inventory investment (read: business spending on everything from machinery to materials to finished goods) as fixed nonresidential investment saw its third straight decline, this time at 0.9 percent.

A few less-than-encouraging signs emerged from other data, this time from the Commerce Department. Corporate profits were up 4.9 percent from the first quarter, a headline number that might quicken some investors’ pulses. But that growth pales in comparison to the 8.9 percent logged in the first quarter (which came after four straight quarters of declines).  Measured year over year, the second quarter corporate profit measure actually declined by about 2 percent.

As reported by Morningstar on Friday, Richard Moody, chief economist at Regions Financial Corp., wrote in a note to the firm’s clients: “Corporate profit margins remain elevated by historical standards but are clearly past their cyclical peak. With profit margins set to compress further over coming quarters, the risks to business investment remain tilted to the downside.”

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