Growth in the US economy was sluggish again in the spring, dashing expectations for a robust rebound after a tough winter.
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US government statisticians have found evidence that efforts to adjust the country’s measure of economic growth for seasonal fluctuations have not been fully successful.
The weak start to 2016 continued through the spring, with the USA economy growing at a surprisingly weak 1.2% annual rate in the second quarter, the Commerce Department said Friday.
A sharp slowing of the rate of inventory accumulation led to a lower than expected 1.2 percent GDP growth rate in the second quarter.
But the lackluster growth report released Friday could be a concern for Fed officials on whether the economy could absorb a further rate hike. The Federal Reserve said on Wednesday that near-term risks to the economic outlook had “diminished”. This also marks the third straight quarterly drop. Average growth in third quarters was marked up to 3.4 percent from 3.1 percent, while the fourth-quarter average was little changed at 2.4 percent.
As it does every summer, the government also revised GDP figures for the past three years to take into account new information and improvements in how the report is calculated. It would be the slowest pace since the recession ended.
As a result of Friday’s news, Capital sliced its full-year GDP expectation from 2 percent to 1.5 percent.
Economists said the decline was payback after strong gains in the first quarter.
Gross domestic product rose at a 1.2 per cent annualised rate after a 0.8 per cent advance the prior quarter, Commerce Department figures showed Friday in Washington.
On the inflation front, the Commerce Department said its reading on core consumer prices, which exclude food and energy prices, climbed by 1.7 in the second quarter after jumping by 2.1 percent in the first quarter. Exports in the quarter rose at a 1.4% pace.
Government spending also shrank last quarter, declining 0.9 per cent, the most in more than two years as outlays for the military fell. Equipment investment has been weak both due to the plunge in energy prices and also the rising trade deficit reducing demand in the USA manufacturing sector.
The economy is expected to pick up steam in the second half of the year.
Personal saving was $763.1 billion in the second quarter, versus $847.8 billion in the first quarter (and the personal saving rate as a percentage of disposable personal income) was 5.5% in the second quarter versus 6.1% in the first. “And it’s certainly holding the economy back”. Imports, which subtract from GDP, fell slightly.
The weakness come at a murky time for America’s economy.
Jason Furman, the chairman of the White House’s Council of Economic Advisers, said in a statement that the estimate “underscores that there is more work to do”.
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The economy this year has withstood a host of problems, from market turbulence caused by fears over how an economic slowdown in China could weaken the global economy to a nosedive triggered by Britain’s vote to leave the European Union.
