Inventories were revised downward by $3 billion in the second quarter, thus leaving a sizable $25.7 billion subtraction to GDP from already-lean levels, as robust 4.0% growth in final sales in the second quarter, vs. the prior 3.2% estimate, caught leary business managers off-guard. The revisions included several expected shifts that boosted sales, including a bump in consumption growth to 3.8%, an upwardly revised export figure that leaves only a 1.2% second-quarter rate of decline, and a downwardly revised import growth rate of 7.9%.
But also, we saw a faster 6.9% growth rate in fixed investment, as a boost in business spending offset an expected downward shift in residential investment, and second-quarter government spending growth is now a robust 8.2%. We now estimate real GDP growth in the third and fourth quarters at 5.5% and 5.0%, respectively. From MMS International