GDP Revised Down to 3.8%

Washington, DC, September 27, 2007—Gross domestic product grew at a revised 3.8% annual rate in the second quarter, according to a Commerce Department report issued Thursday.

The department estimated a month ago that GDP grew at a 4% rate.

Growth in the second quarter was in line with economists' expectations and easily surpassed the first quarter's growth rate of 0.6%.

The pace of expansion is forecast to slow in coming quarters because credit problems that originated in subprime mortgage markets are expected to make consumers more reluctant to spend and businesses wary about investing in new plants and equipment.

The first estimate of performance in the third quarter, which ends on Sunday, will be released on October 31.

Consumer spending, which accounts for more than two-thirds of national economic activity, was left unrevised at a 1.4% growth rate in the second quarter, slowing from 3.7% increase in the first quarter.

Business investment was revised down to an 11% annual growth rate from 11.1% estimated a month ago, still far ahead of the first quarter's 2.1% rate of increase and the strongest since the first quarter of last year.

Core prices, which exclude food and energy, increased at a revised 1.4% annual rate instead of 1.3% estimated a month ago. That was well below the 2.4 % rate of core price rises in the first quarter and was the slowest pace of price rises in four years.