WASHINGTON - The latest figures on gross domestic product growth reinforce the view that the economy has cooled from its breakneck pace of last year.
According to Commerce Department estimates released Friday, the U.S. economy grew in the second quarter at a 5.3% annual rate, as business inventories piled up and consumer spending grew at the slowest rate in three years.
The gross domestic product growth, which had been estimated at a 5.2% annual rate, was up from 4.8% in the first quarter, but still well off the 8.3% growth in the final three months last year, the fastest rate in almost 16 years.
"It looks like we are on a slower-growth path," said Astrid Adolfson, an economist with MCM MoneyWatch in New York.
Slower spending held back corporate profits, the report showed. After-tax corporate profits rose at a 2.4% annual rate, down from 5.7% in the first quarter and the smallest increase since the third quarter last year.
The Commerce Department releases three estimates of each quarter's GDP - the sum of all goods and services produced in the United States - as more information becomes available to its analysts. Friday's report was the second estimate for the second quarter. The final estimate will be released Sept. 28.
Before the report analysts expected a 5.4% growth rate.
Consumer spending, which accounts for roughly two-thirds of overall economic activity, rose at a 2.9% annual rate, down from the 3% gain first estimated and the weakest since a 1.9% increase in the second quarter of 1997.
Spending for durable goods, such as automobiles, appliances, and other big-ticket merchandise, fell at a 5% rate, the biggest decline since a 6.3% drop in the fourth quarter of 1991, when the economy was mired in a recession. Spending for nondurable goods and services grew at a slower pace in the second quarter.
Businesses are taking steps to counter the slowdown. General Motors Corp., the world's largest automaker, announced Aug. 18 that it would idle 900 workers for three weeks at a Wisconsin assembly plant to reduce the number of medium-duty trucks waiting to be sold.
The Janesville, Wis., plant will idle a production line until Sept. 11 because of lower demand.
In another sign of cooler spending, unsold goods piled up in warehouses and store shelves. The second-quarter increase in business inventories, initially reported at a $60.3 billion annual rate, was adjusted to $79.3 billion.
Still, inventories are far from becoming bloated, because "the inventory-to-sales ratio is close to historic lows," said Kevin Flanagan, an economist at Morgan Stanley Dean Witter & Co.
The ratio, which measures the length of time goods sit on shelves at the current sales rate, was 1.32 months in June.