U.S. gross domestic product (GDP) grew at an annualized rate of 3% in the second quarter, signaling the economy's strong performance in a high-interest rate environment set by the Federal Reserve.
The Commerce Department's third estimate of actual GDP growth came in at 3%, confirming its second estimate, which also came in at 3%. Both estimates were up from 1.6% growth in the first quarter.
Corporate profits, adjusted for inventories and capital use, rose $132.5 billion in the second quarter, an increase of $74.9 billion from the previous estimate. The pandemic has caused corporate profits to surge both in dollar terms and as a share of the economy's total value.
Profits by domestic non-financial companies were revised up by $79.6 billion to $108.8 billion, while profits by financial companies were revised down by $4 billion to $42.5 billion.
The Commerce Department said the latest GDP figures included upward revisions to inventory investment and government spending, but these were offset by declines in exports and fixed investment.
The largest contributors to GDP growth in the second quarter were nondurable manufacturing, finance, and health care. Food services, education services, and mining production contributed the most to the overall growth.
The Federal Reserve recently shifted monetary policy, cutting interest rates for the first time in years at its most recent meeting earlier this month. While monetary policy works with a lag compared to the employment situation in the economy, markets are already responding favorably as capital inflows into stocks have increased.
The 0.2 percentage point difference between the third and advance estimates of GDP is a concern for economists, given the Federal Reserve's “data-dependent” approach over the course of the pandemic, which differs from the more planned approach of previous Federal Reserve administrations.
“The increasing frequency and magnitude of data revisions highlight the dangers of 'data reliance' in driving policy,” UBS economist Paul Donovan wrote in an opinion piece on Thursday.
