DHAKA: The US economy grew at a much slower pace than expected in the second quarter and GDP was revised down in the first three months of the year.

The world’s largest economy grew at an annual rate of 1.2% in the three months to June, far below forecasts of 2.6%,

Growth for the first quarter was revised down from 1.1% to 0.8%, reports the BBC.

Conversely, consumer spending surged in the three months to June by an annual pace of 4.2% - the fastest pace since the fourth quarter of 2014.

The Federal Reserve indicated on Wednesday it was still on course to raise interest rates this year after ‘near-term risks’, such as slowing employment, diminished.

Steven Englander, global head of foreign exchange strategy at Citigroup, said, “This isn't bad enough to signal that the US economy is falling apart, but it's another nail in the coffin of a September Fed hike”.

Although consumer spending grew, business investment, which includes stock, supplies, equipment and buildings, fell by 9.7% in the second quarter. Investment in business inventories fell by $8.1bn between April and June, the first decline since the third quarter of 2011.

Chris Williamson, chief economist at Markit, said, “Inventories are always the unpredictable wildcard in the GDP statistics, and the second quarter weakness was in part due to inventories falling for the first time since the third quarter of 2011”.

“The good news is that firms should hopefully start rebuilding stock levels in the second half of the year, boosting growth.”

BDST: 1248 HRS, JUL 30, 2016
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