GDP Growth for Q2 Revised Down to 2.8 Percent

Amid the headline-grabbing “crisis” in the financial sector and public debates over whether the economy is in – or heading toward – recession, the Commerce Department announced that second quarter economic growth was not as rosy as previously reported.

On Friday, Commerce announced in its final revision for second quarter gross domestic product that the economy grew at a 2.8 percent annual rate in the quarter. Last month, Commerce revised second quarter growth up to 3.3 percent after initially announcing a growth rate of 1.9 percent in July. The revision surprised most economists.

Friday’s announcement also surprised economists. Most had expected no revision, with 3.3 percent going down as the official growth rate for posterity. The economy grew at a 0.9 percent rate in the first quarter of 2008 and contracted 0.2 percent in the fourth quarter of 2007.

Major inputs to GDP that were revised down included corporate profits — which were revised from an increase of 1 percent to a decline of 0.4 percent – and consumer spending growth, which fell from a previously reported 1.7 percent to 1.2 percent Friday.