US Economic Growth Slows in Second Quarter

Gross Domestic Product in the United States slowed in the second quarter (April to June) to 2.4% annual rate from 3.7% in the previous quarter.

This was the fourth straight quarter of growth for the world's largest economy but was slightly below the consensus forecast.

The average US GDP growth over the last six months stood at 4.4%.

The second-quarter GDP figure marked the fourth straight quarter of growth and confirmed economists' views that the recession that began in December 2007 ended at some point in the middle of 2009.

The rate of expansion in the first quarter (January to March) was revised up to a 3.7% rise compared with the prior estimate of a 2.7% increase.

However, the worst US recession since the 1930s was even deeper than previously estimated, reflecting bigger slumps in consumer spending and housing, according to the Commerce Department’s annual revisions issued today.

The US economy shrank 4.1% from the fourth quarter of 2007 to the second quarter of 2009, compared with the 3.7% drop previously estimated, today's report showed.

Household spending fell 1.2% in 2009, twice as much as previously projected and the biggest decline since 1942. Consumer spending, which accounts for about 70% of the US economy, rose at a 1.6% pace last quarter, compared with a 1.9% rate the previous three months that was smaller than previously estimated.

Much of the deceleration in the second quarter was due to the trade sector. Consumer spending was only slightly weaker than the first quarter.

The trade gap in the second quarter widened to US$425.9 billion from US$338.4 billion, subtracting 2.8% from growth, the biggest reduction since 1982, today’s report showed. Imports grew at a 29% pace, while exports climbed 10%.

Consumer spending slowed to a rise of 1.6% after rising at a 1.9% annual pace in the previous two quarters. Consumer spending added 1.2% to GDP.

Business investments rose at a 17% annual rate in the second quarter after a 7.8% gain in the first quarter. Business fixed investment added 1.5% to growth.

Inventories increased by US$75.7 billion. The change in inventories added 1.1% to growth.

The savings rate rose to 6.2%, the most since 1998. Real disposable income rose 4.4%.

Corporate spending on equipment and software jumped at a 22% annual rate, the biggest increase since 1997.

The Fed’s preferred price gauge, which excludes food and energy costs, rose at a 1.1% annual pace after an upwardly revised 1.2% rate in the first quarter, today’s report showed. The revision may help ease concern over deflation.

This GDP report is the first of three for the quarter, with the other releases scheduled for August and September.

US Economic Growth Slows in Second Quarter
8/2/2010 4:32:15 AM