U.S. economy sputtering, GDP report shows

Real gross domestic product in the U.S. rose only 1.6% in the second quarter of 2010, confirming anecdotal and actual evidence in Arkansas and across the U.S. that the nation’s economy is sputtering.

In the first quarter, real GDP, the output of goods and services produced by labor and property located in the U.S. increased 3.7%, according to the U.S. Bureau of Economic Analysis. Earlier estimates from the bureau suggested that the increase in real GDP would be around 2.4% in the second quarter.

Even with the likelihood that the new GDP numbers will stoke fears of a double-dip recession, the slowdown was not as severe as some economists’ predictions that the U.S. growth rate would fall to annualized rate of 1.4% between April and June.

The U.S. Department of Commerce, which produces the quarterly report, said the deceleration in real GDP primarily included a record run-up in imports and a sharp decline in corporate profits and private investment.

For example, domestic profits of financial corporations decreased $0.4 billion in the second quarter, in contrast to an increase of $5.2 billion in the first. Profits of nonfinancial corporations increased $67.9 billion in the second quarter, down 42.1% from $117.2 billion in the first.

Other highlights of the Friday’s report included:
• The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.1% in the second quarter.

• Imports of goods and services increased 32.4%, compared with an increase of 11.2%. Federal government consumption expenditures and gross investment increased 9.1% in the second quarter, compared with an increase of 1.8% in the first. National defense increased 7.3%, compared with an increase of 0.4% in the first quarter.

• Private inventories added 0.63 percentage point to the second-quarter change in real GDP, after adding 2.64 percentage points to the first-quarter change. Private businesses increased inventories $63.2 billion in the second quarter, following an increase of $44.1 billion in the first quarter and a decrease of $36.7 billion in the fourth.

• Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — increased 4.9% in the second quarter, compared with an increase of 3.9% in the first.

• Gross national product — the goods and services produced by the labor and property supplied by U.S. residents — increased 1.7% in the second quarter, compared with an increase of 4.4% in the first.