Economic growth was much weaker than previously estimated in the second quarter as a drought cut into inventories, setting the platform for an even more sluggish performance in the current quarter against the backdrop of slowing factory activity.
Gross domestic product expanded at a 1.3 percent annual rate, the slowest pace since the third quarter of 2011 and down from last month’s 1.7 percent estimate, the Commerce Department said in its final estimate on Thursday.
Output was also revised down to reflect weaker rates of consumer and business spending than previously estimated. Outlays on residential construction export growth were also not as robust as had been previously estimated.
Economists polled by Reuters had expected second-quarter GDP growth would be unrevised at a 1.7 percent pace. The economy grew at a 2.0 percent pace in the January-March period.
The worst drought in half a century, which gripped large parts of the country in the summer, saw farm inventories dropping $5.3 billion in the second quarter after slipping $1 billion in the first three months of the year.
Orders for durable goods, products designed to last at least three years, fell 13.2% last month to a seasonally adjusted $198.49 billion, the Commerce Department also said.
That was the biggest decrease since January 2009 and the lowest dollar figure for new orders since February 2011. Economists surveyed by Dow Jones Newswires expected a 5.6% drop in August new orders.
Durable-goods orders for July were $228.62 billion, a 3.3% gain from the prior month.
Declining transportation orders led the August numbers lower.
Civilian-aircraft orders, a volatile component of the durable-goods report, collapsed. That was expected. Wrightson ICAP noted that Boeing Co. BA +1.24% orders fell from 260 in July to one last month. “This is a temporary lull, as those orders have picked up again so far in September,” Wrightson ICAP said ahead of the durable-goods report.
While other sectors didn’t fall as much, they still declined.
Motor-vehicle and parts orders dropped 10.9%.
Outside of transportation, August orders slid 1.6%.
Orders for metals, machinery and computers all declined. Electrical-equipment orders rose 3.8%.
Thursday’s report showed that one key barometer of business investment grew in August. Orders for nondefense capital goods excluding aircraft increased by 1.1%, suggesting a small degree of optimism among companies about the economic recovery.
The industrial sector has flashed mixed signals recently, though overall signs point to a slowdown.
The number of Americans filing new claims for jobless benefits fell last week to the lowest level in two months.
Initial claims for state unemployment benefits dropped 26,000 to a seasonally adjusted 359,000, the lowest level since July, the Labor Department said on Thursday. The prior week’s figure was revised up to show 3,000 more applications than previously reported.
Economists polled by Reuters had forecast claims falling to 378,000 last week. The four-week moving average for new claims, a better measure of labor market trends, fell 4,500 to 374,000, breaking five straight weeks of increases.
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