Friday, 28 January 2022

US economy slows in second quarter

(Andrew Kelly/REUTERS)

WASHINGTON: US economic growth slowed less than expected in the second quarter as a surge in consumer spending blunted some of the drag from declining exports and a smaller inventory build, which could further allay concerns about the economy’s health.

But the fairly upbeat report from the Commerce Department on Friday had some red flags for the 10-year-old economic expansion, the longest on record. Business investment contracted for the first time in more than three years and housing declined for a sixth straight quarter.

Federal Reserve Chairman Jerome Powell early this month flagged the two sectors as areas of weakness in the economy. They are likely to provide additional cover for the Fed to cut interest rates next Wednesday for the first time in a decade because of rising risks to the economy’s outlook from a bitter trade war between the United States and China, and slowing global growth.

“The key to future economic growth is business spending. Evidently, businesses do not share the ebullience consumers have,” said Sung Won Sohn, an economics professor at Loyola Marymount University in Los Angeles. “This is not a good sign for the economy because there would be fewer jobs for consumers. For this reason, the Fed will cut rates next week.”

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