“Today’s (Friday’s)terrible GDP report is another signal that our economy is still struggling. It’s obvious that top-down, Washington-knows-best policies aren’t working and need to be replaced with ideas that empower people over special interests.” Rep. Scott Garrett CD-5
Inventory liquidation weighs on U.S. second-quarter GDP growth
By Lucia Mutikani
WASHINGTON (Reuters) – The U.S. economy grew far less than expected in the second quarter as inventory investment fell for the first time in nearly five years, but a surge in consumer spending pointed to underlying strength.
Gross domestic product increased at a 1.2 percent annual rate after rising by a downwardly revised 0.8 percent pace in the first quarter, the Commerce Department said on Friday.
“Once the impact of a downward inventory adjustment is considered, the underlying pace of growth looks healthier than the headline number,” said Chris Williamson, chief economist at IHS Markit in London.
The economy was previously reported to have expanded at a 1.1 percent pace in the first quarter. Economists had forecast GDP growth rising at a 2.6 percent rate in the last quarter.
While the inventory drawdown weighed on GDP growth, that is likely to provide a boost to output for the rest of the year. Excluding inventories, the economy grew at a 2.4 percent rate. A measure of domestic demand grew at a 2.7 percent pace.
The Federal Reserve said on Wednesday that near-term risks to the economic outlook had “diminished.” With the second-quarter GDP report, the government also published revisions to data going back to 2013 through the first quarter of 2016.
