US economy slowed to 2.1% growth rate in second quarter

WASHINGTON — The U.S. economy slowed sharply in the April-June quarter even as consumers stepped up their spending.

The gross domestic product, the economy’s total output of goods and services, grew at a 2.1% annual rate last quarter, down from a 3.1% gain in the first quarter, the Commerce Department estimated Friday.

But consumer spending, which drives about 70% of economic activity, accelerated to a sizzling 4.3% growth rate after a lacklustre 1.1% annual gain in the January-March quarter, boosted in particular by auto sales. The resurgent strength in household spending was offset by a widening of the trade deficit and slower business inventory rebuilding.

Economists also noted that business capital investment fell in the April-June quarter for the first time in three years. That weakness likely reflects some reluctance by businesses to commit to projects because of uncertainty surrounding President Donald Trump’s trade war with China.

Indeed, most analysts think the U.S. economy could slow through the rest of the year, reflecting global weakness and the trade war between the world’s two largest economies.

This week, the International Monetary Fund downgraded its outlook for the world economy because of the trade conflict. China’s own growth sank last quarter to its lowest level in at least 26 years after Trump raised his tariffs on Chinese imports to pressure Beijing over the tactics it’s using to challenge U.S. technological dominance. Economists say China’s slowdown might extend into next year, which would have global repercussions because many countries feed raw materials to Chinese factories.

Europe, too, is weakening in the face of global trade tensions — a concern that led the European Central Bank to signal that more economic stimulus could be coming soon.

The global weakness is a key reason why the Federal Reserve is widely expected to cut interest rates next week for the first time in more than a decade and to signal that it may further ease credit in the months ahead.

Sung Won Sohn, a business economist at Loyola Marymount University in California, noted the disparity between solid U.S. consumer spending and tepid corporate investment.

“Consumers and businesses are going their separate ways,” Sohn said. “If the pattern continues, it is not a good sign for the economy because there would be fewer jobs. For this reason, the Federal Reserve will go ahead with an interest-rate cut next week.”

Larry Kudlow, head of the president’s National Economic Council, blamed last year’s four rate increases by the Fed, rather than Trump’s trade policies, for last quarter’s drop in business investment.

“I don’t think the trade factor is nearly as important as the monetary factor,” Kudlow said in a CNBC interview Friday. “I am hoping that monetary policy makes the shift that investors are expecting.”

U.S. Economy

Get local stories you won't find anywhere else right to your inbox.
Sign up here

 

File photo by THE ASSOCIATED PRESS The gross domestic product, the economy’s total output of goods and services, grew at a 2.1% annual rate last quarter, down from a 3.1% gain in the first quarter.

Just Posted

Carbon capture project near Clive is now operational

$1.2 billion project will see CO2 injected underground to recover oil

Uncertainty clouds summer holiday plans for central Albertans

People ‘itching to get out’ should be patient, says tourism director

Lacombe lands title for world’s largest fishing lure

Lacombe has hooked itself some bragging rights. The city is home to… Continue reading

Windows smashed as vandals go on a destructive spree in Sylvan Lake

More than $5,000 in damage caused in early-morning rampage last Friday

Solidarity together: Central Albertans protest in Red Deer against racism

There’s no such thing as a little bit of racism. Even one… Continue reading

Trudeau avoids questions about anti-racism protesters dispersed for Trump photo-op

Prime minister says racism is an issue Canadians must tackle at home, too

Central Alberta playgrounds receive funding boost from Alberta Education

A pair of local playgrounds are among a group of projects that… Continue reading

FIFA signals support for in-game Floyd solidarity messages

FIFA urged soccer competition organizers on Monday to apply “common sense” and… Continue reading

Live horse racing set to officially return this weekend for Woodbine

TORONTO — Woodbine Entertainment made the announcement Monday that it will resume… Continue reading

‘Welcome Back!’ Several famed museums reopen across Europe

AMSTERDAM — In the Netherlands, the intimate gaze of the Girl with… Continue reading

Music industry calls for Black Out Tuesday amid unrest

NEW YORK — The music industry is planning to turn off the… Continue reading

Trudeau promises to speed $2.2 billion in funding for strapped cities

Trudeau promises to speed $2.2 billion in funding for strapped cities

Trudeau rejects Trump suggestion to readmit Russia to G7, citing Crimea invasion

Trudeau rejects Trump suggestion to readmit Russia to G7, citing Crimea invasion

Most Read