NEW YORK (CNN/Money) - U.S. economic growth in the second quarter was as weak as initially reported, the government said Thursday, while a separate report said new jobless claims jumped last week.
The Commerce Department said its second reading of U.S. gross domestic product (GDP) growth in the second quarter was unrevised at 1.1 percent, compared with growth of 5 percent in the first quarter. Economists, on average, expected no revision to the second quarter reading, according to Briefing.com. GDP is the broadest measure of the world's largest economy.
"The fears we had that growth was pretty soft and fungible are basically coming out; that's what the data are showing," said Anthony Chan, chief economist at Banc One Investment Advisors, who recently published a research report showing that the government's second reading of GDP is usually the most accurate one.
Separately, the Labor Department said the number of Americans filing new claims for unemployment benefits rose to 403,000 in the week ended Aug. 24 from a revised 395,000 the prior week. Economists, on average, expected 385,000 new claims, according to Briefing.com.
The data helped push U.S. stock prices lower, while Treasury bond prices rose.
Consumer spending, the biggest component of GDP at about two-thirds of the $9.4 trillion total, slowed to 1.9 percent growth, compared with 3.1 percent in the first quarter, the Commerce Department said in its report.
Fixed private investment, a key measure of business spending, shrank at a 1.2 percent pace, a little worse than the 0.5 percent pace in the first quarter.
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And corporate profits fell $13.4 billion in the quarter after falling $13.8 billion in the first quarter.
Federal Reserve Chairman Alan Greenspan and other economists have called business spending the key to the economy's recovery from a recession that began in March 2001.
"The data for the second quarter seem to point to a solid rebound in growth," said Joel Naroff, president and chief economist of Naroff Economic Advisors in Holland, Pa. "That should generate improvement in profits, and hopefully the available funds will be spent on investment."
Many economists think the economy will grow at a pace of between 2 and 3 percent in the second half of the year. Such growth would keep the economy from "double dipping" into recession, but it might not be robust enough to inspire businesses to hire new workers, and continuing weakness in the labor market could keep consumer spending from growing rapidly.
So far, the future of consumer spending is unclear. The housing market, which has helped support spending by making consumers feel wealthier and allowing them to refinance their mortgages, giving them more cash to spend, has remained red-hot this summer.
But a closely watched measure of consumer confidence fell in July, weighed down by falling stock prices, mistrust of corporate accounting and other worries.
Business inventories grew $36.2 billion in the quarter, adding 1.4 percentage points to GDP. Excluding the change in inventories, final sales of U.S. goods and services actually shrank 0.3 percent in the second quarter, the worst performance since it fell 0.2 percent in the third quarter of 2001, which included the Sept. 11 terror attacks. Final sales grew 2.4 percent in the first quarter.
Government spending growth slowed to a 1.4 percent pace, from 5.6 percent in the first quarter. Robust government spending on security and defense in the wake of the Sept. 11 attacks helped lift GDP in the fourth quarter of 2001 and the first quarter of 2002.
U.S. imports outpaced exports by $47.5 billion in the quarter, subtracting 1.65 percentage points from the headline GDP number.
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