WASHINGTON (CBS.MW) - The U.S. economy slowed sharply in the second quarter, growing at a 1.1 percent annual pace following revised 5.0 percent growth in the first quarter, the Commerce Department said Wednesday.
All of the growth in real gross domestic product was due to inventory changes. Excluding inventories, real final sales fell 0.1 percent.
Economists had expected GDP growth of about 2.4 percent.
Consumer spending flagged in the April through June quarter, advancing just 1.9 percent after growing 3.1 percent in the first quarter.
Meanwhile, business investment declined for the seventh straight quarter, sinking 1.6 percent. However, investments in equipment and software rose 2.9 percent, the first increase since the third quarter of 2000.
The government also revised its estimates of GDP back to 1999, revealing for the first time that the economy contracted for three quarters - not just one - during last year's recession.
Some unknowledgeable commentators and officials had suggested that the economy had not really endured a recession last year because the economy had not contracted for at least two quarters.
However, economists do not judge recessions by mere GDP, but by more detailed monthly figures on job growth, consumer spending, personal income and business investment. The debate about the recession is academic at this point.
The economy grew just 0.3 percent in all of 2001, not the 1.2 percent previously estimated. Growth in 2000 was revised to 3.8 percent from 4.1 percent. Growth in 1999 of 4.1 percent was not revised.
From the trough in 1991 to the peak in late 2000, the economy grew at an annual rate of 3.5 percent.
The quarterly GDP figures reveal a slightly weaker economy than pictured before. While economists have been warning of an expected slowdown in GDP due to a smaller change in inventories, they were hoping final sales would remain healthy.
Federal Reserve Chairman Alan Greenspan has warned repeatedly that the Fed will not consider the recovery firmly in place until policymakers see signs of persistent growth in final sales to consumers and businesses.
The Fed has no worries on the inflation front. The personal consumption expenditure deflator - the Fed's preferred gauge of consumer inflation - rose 2.5 percent, but core inflation was up at just 1.7 percent.
The GDP report shows weakness in the economy is rotating slightly from the business sector to consumers. While business investment is improving, consumer investment in residences slowed to 5 percent growth from 14.2 percent in the first quarter.
Consumer spending, which represents about two-thirds of final sales, also slowed.
Spending on durable goods rose 2.4 percent after falling 6.3 percent in the first quarter, thanks to continued incentives to buy autos. Spending on nondurable goods fell 0.6 percent, the largest decline in 10 years.
Spending on services rose 3 percent.
The growth in business investment ought to be a signal for U.S. producers to crank up their output. However, imports of goods jumped 28.9 percent in the quarter, soaking up some of the increased demand from U.S. businesses.
Exports rose 11.7 percent, including the first increase in exports of goods in seven quarters.
Federal government spending remained healthy in the quarter, growing 7.4 percent. Defense spending increased 8 percent. Spending by state and local governments, on the other hand, fell 1.1 percent, reflecting tight budgets due to falling tax receipts.
So long,
Calexa
www.carstenlexa.de