The economy grew much slower than previously thought in the second quarter as business inventories and exports were less robust, according to a Friday report by the U.S. Commerce Department. Gross domestic product (GDP) growth rose at annual rate of 1.0 percent, the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. It also said after-tax corporate profits rose at the fastest pace in a year. Economists had expected output growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent. The government's second GDP estimate for the quarter confirmed growth barely moved in the first six months of this year. The downward revisions to second-quarter growth came as businesses accumulated less stock than previously estimated. Business inventories increased $40.6 billion instead of $49.6 billion, cutting 0.23 percentage point from GDP growth during the quarter. However, the slow build-up of inventories means goods are not piling up on shelves, which should support growth in the third quarter. Excluding inventories, the economy grew at a 1.2 percent rate. Output was also curbed by exports, which grew at a 3.1 percent pace instead of 6.0 percent. Imports increased at a 1.9 percent rate rather than 1.3 percent. That left a slightly wider trade deficit and trade barely contributed to GDP growth. Trade had previously been estimated to have added 0.58 percentage point to overall output.
