US economy

US economic growth cools to 2.1% in second quarter


The rate of US economic growth cooled in the second quarter although it still slightly exceeded analysts’ expectations, propped up by solid consumer and government spending.

Gross domestic product increased 2.1 per cent on an annualised basis in the three months ended June 30, according to the advance estimate from the Bureau of Economic Analysis on Friday.

Although that was the slowest pace of growth since the March quarter of 2017 and a marked slowdown from the 3.1 per cent pace in the first three months of this year, it topped the median of economists’ forecasts for growth of 1.8 per cent.

The report reflected positive contributions to GDP growth from personal consumption expenditures, federal government spending and state and local government spending, although these were partly offset by negative contributions from private inventory investment, exports, nonresidential fixed investment and residential fixed investment, the BEA said. Imports, which detract from GDP growth, increased.

Earlier this month the post-crisis expansion this month became the longest uninterrupted stretch of growth in modern US history.

Investors have received some data in recent weeks that provided encouragement regarding the domestic economic outlook. These included rebounds in the labour market, retail sales and durable goods order in June.

However, the market is still betting heavily that the US central bank will ease monetary policy at the conclusion of its rate-setting meeting next week. Investors are pricing in a 76.5 per cent chance of a 25-basis point cut from the Fed, according to CME Group.

Market reaction to the data was muted. Yields on 10-year US Treasury notes rose 2 basis points, indicating a fall in price, before paring some of their losses. The 2-year yield — which is more sensitive to monetary policy — rose 3 basis points before falling as well.

The dollar rose 0.15 per cent against its peers.



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