Federal Reserve Chair Janet Yellen told lawmakers last week that data pointed to "a noticeable step-up" in GDP growth in the second quarter. The Atlanta Federal Reserve is currently estimating second-quarter GDP rising at a 2.6 percent rate.
When measured from the income side, the economy grew at a 2.9 percent rate in first quarter and not the previously reported 2.2 percent pace, reflecting upward revisions to corporate profits.
Economic growth in the first quarter was constrained by a strong dollar and sluggish global demand, which crimped exports. Output was also hampered by businesses' efforts to reduce an inventory overhang, with a further drag coming from lower oil prices, which have sparked deep spending cuts on equipment.
Economists also believe the model used by the government to strip out seasonal patterns from data is not fully accomplishing its goal. The economy has underperformed in the first quarter in five of the last six years.
The government said early this month its review found inconsistencies in the manner in which monthly source data are utilized in the compilation of quarterly GDP estimates. It said the review had also uncovered issues related to revision policies and practices "that prevented the most recent seasonal adjustments from being applied to historical time series."
The government said beginning in mid-2018, it planned to produce estimates of GDP and its major components that are not seasonally adjusted. These will be released together with the seasonally adjusted GDP estimates.
In the first quarter, business spending on software, research and development was revised to show it rising at a 4.4 percent rate instead of falling at a 0.1 percent rate. Business spending on equipment fell at an 8.7 percent pace as opposed to the 9.0 percent rate reported last month.
Overall, business spending sliced off 0.58 percentage point from first-quarter GDP instead of the previously reported 0.81 percentage point.