US economic growth slowed to 2.4% in the second quarter of this year, the Commerce Department said today. The number, a first estimate, was slightly lower than the 2.5% rate expected by most analysts. The economy has grown by 3.7% in the first three months of the year. Economic growth slowed as a capital investment drive by businesses saw imports increasing at their fastest pace since the first quarter of 1984, the Commerce Department said.
The US economy, which is digging out of its longest and deepest recession since the 1930s, has now grown for four quarters in a row. However, growth has been too tepid, making little impact on a high unemployment rate. Growth in the last quarter was held back by 28.8% surge in imports, which eclipsed a 10.3% rise in exports. That created a trade deficit, which lopped off 2.78 percentage points from growth, the largest subtraction since the third quarter of 1982.
Outside the trade sector, however, details of the report were rather encouraging. Business investment rose at a 17% rate, the largest increase since the first quarter of 2006, after a 7.8% pace during the previous period.
Spending on equipment and software was the largest since the third quarter of 1997, while investment on structures rose for the first time since the third quarter of 2008, likely boosted by a rise in oil and gas drilling. Growth during the second quarter was also supported by new home construction, which surged at a 27.9% rate after being a drag on growth in the first quarter.
This reflected a spurt in building activity spurred by a popular homebuyer tax credit that has since expired. The rate of increase was the biggest since the third quarter of 1983. Residential investment had contracted at a 12.3% rate in the first quarter. But there were some areas of concern. The report showed consumer spending was not as robust as had been previously thought. Growth in consumer spending was at a 1.6% rate in the second quarter after increasing at a revised 1.9% in the first quarter.
Consumer spending, which normally accounts for 70% of US economic activity, had previously been estimated to have grown at a 3% rate in the first quarter. Spending added 1.15 percentage points to GDP last quarter.