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The U.S. Commerce Department sent a warning shot across the bow this morning, when it posted its second, and final, revision of June-quarter gross domestic product growth. Now, normally, this metric is not a big event, as we have already had the first, or flash, estimate of GDP growth, and an initial revision a month ago. Indeed, expectations had been that second-quarter GDP growth would have been unchanged in this latest report, at 1.7%.

Thus, when the data came out at 8:30AM (EDT), it showed a growth rate of just 1.3%. This latest rate of activity also compared unfavorably with the first-quarter gain of 2.0%. (This, unfortunately, was not the only dour report to be issued this morning, as we also saw data showing a small increase in weekly jobless claims and a much larger-than-expected drop in durable goods orders for August.)

Meanwhile, behind this sharp setback in GDP growth in the second quarter was a slowdown in consumer spending and the impact of the long and severe drought in the Midwest.

The revised GDP figure, which takes into account more complete data than last month's revision, showed more modest growth due to downward revisions in inventory investment and exports. The aforementioned drought in the Midwest caused farm inventories to fall, detracting from GDP. Second-quarter crop output was revised lower, which accounted for the lesser accumulation of stocks of food. That shrinkage also contributed to the lesser level of exports, as foodstuffs are a big chunk of the goods we normally send overseas.

One bright note in this otherwise dour report was the fact that corporate profits rose more than originally estimated. All told, earnings were up by 6.7% in the period; that was modestly better than the earlier estimated gain of 6.1%.

All told, meanwhile, this was the weakest GDP growth reading since the third quarter of last year when growth also came in at 1.3%. However, this was the 12th consecutive quarter of growth for the economy, following the long stretch of falling GDP metrics during the recession. That said, during this three-year period, growth has generally been understated, and we see little in the current picture to assume that upcoming presumptive GDP gains will vary much from the recent run of uninspiring metrics.  

  At the time of this article's writing, the author did not have positions in any of the companies mentioned.