labels: industry - general
US economic growth slackens to 2.5 per cent in Q2news
28 July 2006

Mumbai: The US economy recorded a growth of 2.5 per cent in the second quarter of the current year (April-June 2006) against the 5.6 per cent growth in the first quarter, according to figures released by the commerce department. The rate of expansion in gross domestic product at 2.5 per cent was much below the Wall Street forecast of three per cent.

The department said the deceleration in real GDP growth in the second quarter largely reflected a decline in consumer spending on durable goods, equipment and software. The department also attributed it to rising inflationary pressures.

Personal consumption expenditures (PCE), on which the Federal Reserve's bases its inflation index, rose to 4.1 per cent in the second quarter against 2.0 per cent in January-March. Expenditure has gone up while consumption fell.

US exports also grew much slower in the quarter, while federal spending and residential fixed investment also declined

Slower consumption growth has been due mainly to a fall in spending on costly durable goods like new cars. At the same time, expenditure on personal consumption minus food and energy grew at 2.9 per cent in the second quarter, well ahead of the first quarter's 2.1 per cent.

The setting in of strong inflationary pressures comes ahead of the central bank's next rate-setting meeting on August 8. Rising prices and a worse-than-expected GDP growth may leave Fed chairman Ben Bernanke with little choice than another rate hike.

 


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US economic growth slackens to 2.5 per cent in Q2