GDP expands 1.3 percent

WASHINGTON, Sept. 27 (UPI) -- The Commerce Department on Friday reported that the U.S. economy, as measured by the gross domestic product, expanded at a revised 1.3 percent annual pace during the second quarter, faster than the 1.1 percent clip the government reported on Aug. 29.

Economists on Wall Street were expecting GDP to expand at a 1.1 percent pace in the second quarter after expanding 5.0 percent in the first quarter and 2.7 percent during the fourth quarter.

For all of 2001, gross domestic product, or the total output of goods and services produced in the United States, grew at a 0.3 percent, down sharply the 3.8 percent annual rate for all of 2000.

The report confirms that the economic recovery slowed considerably in the

second quarter. However, financial markets could brighten on news of the

latest report because it shows more growth than the initial data indicated.

Some analysts expect the Federal Reserve may cut rates before the end of

the year if the economy falters. At its monetary policy meeting Tuesday, the Fed left interest rates unchanged but two of the Fed's 12 voting policymakers dissented and backed an immediate rate cut.

The report showed after-tax corporate profits rose 1.7 percent during the quarter, slower than the 2 percent growth posted in the first quarter. After-tax profits from current production, a gauge watched closely by economists, fell 4 percent after falling 7.1 percent in the first quarter.

Consumer spending, which accounts for two-thirds of the economy, grew at a revised 1.8 percent annual rate, slower than the 1.9 percent annual rate originally reported and after growing 3.1 percent in the first quarter and a 6.1 percent clip posted in the final quarter of last year.

The report showed spending on equipment and software rose at a 3.3 percent annual rate in the quarter, up from the 3.1 percent growth rate reported last month.

Current-production cash flow, the government's method of measuring internal funds available to corporations for investment, fell $12.6 billion at an annual rate in the second quarter after declining $36.3 billion in the first quarter.

Business fixed investment, which includes spending on commercial construction as well as business equipment and software, fell at a 2.4 percent annual rate after falling at a 5.8 percent rate in the first quarter.

The government agency said imports rose by $75.8 billion in the second quarter and exports rose by $34.9 billion.

Inventories rose by $4.9 billion at an annual rate, less than the rise of $7.3 billion initially reported and after dropping at a $28.9 billion rate in the first quarter.

Real final sales, which exclude inventories and are watched closely by economists to gauge underlying demand, fell at a 0.1 percent rate, compared with a 0.3 percent rate of decline reported a month ago. In the first quarter, real final sales rose at a 2.4 percent annual rate.

The Commerce Department said government spending rose at a 1.4 percent annual rate, the same as previously reported and slower than the 5.6 percent rise in the first quarter.

The GDP price deflator expanded at a 1.2 percent rate, faster than the 1.1 percent annual rise posted a month ago but down from the 1.3 percent rise posted during the first quarter.