Weak US business investment, tepid profits cast shadow on economy

US business investment contracted more sharply than previously estimated in the second quarter and corporate profit growth was tepid, casting a shadow on an economy that is being stalked by financial market fears of a recession.
Weak business spending, which has been blamed on the Trump administration’s nearly 15-month trade war with China, and tepid profit gains could raise doubts on consumers’ ability to continue driving the economy.
Consumer spending is being fuelled by a strong labour market.
The trade war is threatening the longest economic expansion on record, now in its 11th year.
Federal Reserve chair Jerome Powell said last week policymakers “expect the economy to continue to expand at a moderate rate,” but reiterated that “weakness in global growth and trade policy uncertainty have weighed on the economy and pose ongoing risks.”
The US central bank cut interest rates again last Wednesday after lowering borrowing costs in July for the first time since 2008.
Business investment declined at a 1.0% annualised rate last quarter, the government said in its third reading of second-quarter gross domestic product yesterday.
That was the steepest decline since the fourth quarter of 2015.
Business investment was previously estimated to have declined at a 0.6% pace.
It was pulled down by an 11.1% pace of drop in spending on structures, which reflected decreases in the categories of commercial and healthcare, and mining exploration, shafts and wells.
After-tax profits without inventory valuation and capital consumption adjustment, which correspond to S&P 500 profits, increased at a downwardly revised $59.7bn, or 3.3% rate.
Profits were previously reported to have advanced by $86.0bn, or at a 4.8% rate in the second quarter.
There were downward revisions to profits from the rest of the world and domestic industry profits.
Gross domestic product increased at an unrevised 2.0% rate in the first quarter as the strongest consumer spending in 4-1/2 years offset weak exports and a slower pace of inventory investment.