WASHINGTON, July 29: US growth slowed marginally to 3.4 per cent in the second quarter, the government said on Friday, but analysts said the world’s biggest economy remained in rude health. Gross domestic product growth in the quarter to June decelerated from the pace of 3.8 per cent seen in the previous three months, the commerce department said in a first estimate.
The figure was just shy of economists’ forecasts for GDP growth of 3.5 per cent in the June quarter. “The details of the report are actually stronger than the headline,” said Sal Guatieri, chief economist at the BMO Financial Group. “There’s really no evidence of weakness in any area of the economy in this report,” he said.
The commerce department also revised down growth figures for previous years. It said that from 2001 — when the US economy lapsed into recession during President George W. Bush’s first year in office — to 2004, the economy grew at an annual tick of 2.8 per cent and not 3.1 per cent, as previously thought.
Downward revisions for investment in information technology and software were the major cause of the weaker growth estimate. The revised data show the recovery since the 2001 recession was the weakest since World War II, but they still compare favourably with stagnant growth in Europe and Japan over the period.
As a result of Friday’s figure, GDP has increased 3.6 per cent in the past year. Consumer spending, business investment, residential investment, government spending and net trade all contributed to growth in the second quarter.
Consumer spending, the motor of the US economy, was up 3.3 per cent in the three months, compared with 3.5 per cent in the previous quarter. Spending on durable goods such as cars and refrigerators jumped 8.3 per cent. June saw General Motors Corp launch a hugely popular price discount programme that saw its showroom sales rocket and forced rival car makers into following suit.
Foreign trade, normally the US economy’s Achilles heel, was surprisingly good in the June quarter. Exports surged 14.5 per cent, while imports were down 2.0 per cent, ensuring that trade made its biggest contribution to GDP since the final quarter of 1996.
Corporate investment rose 9.3 per cent. But inventories were a large drag on GDP, subtracting 2.32 percentage points from growth, as companies drew down about $6.4 billion worth of goods. That could set the stage for a rebound in production, and hence growth, later in the year. Consumer inflation spiked higher as energy costs hit new highs in the second quarter, the GDP report showed.—AFP
