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.”

 

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

Red Deer would be the site of potential TV show

A potential TV show aims to bring Red Deer kids across the… Continue reading

Oilsands firms considering diluent recovery units to boost crude-by-rail volumes

CALGARY — Ongoing pipeline project delays and growth in crude-by-rail capacity from… Continue reading

Ex-Eskimos CEO gets new job among flurry of Alberta government appointments

Ex-Eskimos CEO gets job among flurry of appointments EDMONTON — Len Rhodes,… Continue reading

State of mind to be key issue in Alek Minassian trial, judge says

TORONTO — The trial of a man accused of killing ten people… Continue reading

WATCH: ‘Lots to see and do’ at Pioneer Days in Red Deer

Sunnybrook Farm Museum is celebrating its 24th annual Pioneer Days this weekend.… Continue reading

Your community calendar

Thursday The Red Deer and District Garden Club hosts its annual Flower… Continue reading

Two men seriously injured after small plane crashes in Alberta field

BLACK DIAMOND, Alta. — Two people were injured in a plane crash… Continue reading

Two young girls dead after collision in Manitoba, RCMP say

DAUPHIN, Man. — RCMP say two young girls are dead after a… Continue reading

Chrystia Freeland condemns violence in Hong Kong, backs right to peaceful assembly

OTTAWA — Foreign Affairs Minister Chrystia Freeland is condemning violence in Hong… Continue reading

Canadians killed in Afghanistan honoured during emotional dedication ceremony

OTTAWA — Emotions ran free in Ottawa Saturday as the more than… Continue reading

Liberals unveil $3B sole-source deal for armoured vehicles ahead of election

OTTAWA — The federal Liberal government has unveiled plans to award a… Continue reading

85-year-old, lifting since 1950, on track to cinch weightlifting championship

MONTREAL — Olympic-style weightlifting isn’t just about strength or power. It’s about… Continue reading

Ottawa Mayor Jim Watson comes out as gay after 40 years

OTTAWA — After 40 years, Ottawa Mayor Jim Watson has come out… Continue reading

Most Read