U.S. economic growth slowed in the second quarter but still exceeded economist estimates, according to a report released by the Commerce Department on Friday.
The Commerce Department said real gross domestic product climbed by 2.1 percent in the second quarter following the 3.1 percent jump in the first quarter. Economists had expected the pace of GDP growth to slow to 1.9 percent.
The stronger than expected GDP growth was partly due to a substantial acceleration in the pace of growth in consumer spending, which soared by 4.3 percent in the second quarter after rising by 1.1 percent in the first quarter.
A 7.9 percent spike in federal government spending also contributed to the GDP growth along with a 3.2 percent increase in state and local government spending.
Meanwhile, the Commerce Department said negative contributions from private inventory investment, exports, non-residential fixed investment and residential fixed investment limited the upside.
The report also said imports, which are a subtraction in the calculation of GDP, inched up by 0.1 percent in the second quarter after tumbling by 1.5 percent in the first quarter.
“What dragged down overall GDP growth was a big drag from inventories, which subtracted 0.9% points from GDP growth, and net external trade, which subtracted 0.7% points,” said Paul Ashworth, Chief U.S. Economist at Capital Economics.
The slowdown in GDP growth compared to the first quarter reflected downturns in inventory investment, exports, and non-residential fixed investment, which were partly offset by the accelerations in consumer and government spending growth.
“Now in its longest expansion on record, the U.S. economy continues to look healthy,” said Oxford Economics’ Chief U.S. Economist Gregory Daco and U.S. Economist Jake McRobie.
They added, “However, given the persistent protectionist draft, the lingering policy uncertainty breeze, the sniffling global economy, and the cooling room temperature at home, now may be an opportune time for a Fed immunization shot.”
On the inflation front, the Commerce Department said a reading on core consumer prices, which exclude food and energy prices, showed price growth accelerated to 1.8 percent in the second quarter from 1.1 percent in the first quarter.
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