U.S. economy expected to pick up after weak growth in spring
A surprisingly lacklustre economy last quarter served as a reminder of how choppy the pace of growth has been in the U.S. since the Great Recession ended seven years ago. Businesses pared their stockpiling and investment through the spring. But consumers — the heart of the U.S. economy — kept spending. Most economists foresee faster, if still modest, growth the rest of this year.
The Commerce Department’s report Friday showed that gross domestic product — the broadest gauge of the economy — grew just 1.2 per cent in the April-June quarter. That was far weaker than the forecasts of most analysts, who had expected growth of twice that pace in a bounceback from a slump at the start of the year.
The biggest factor for the shortfall in GDP growth last quarter was that businesses reduced their restocking by the most since 2011. That pullback in stockpiling subtracted 1.2 percentage points from annualized growth in the AprilJune quarter — more than economists had expected. It was the fifth straight quarter in which weak inventory building has dampened the economy’s growth.
But most analysts say the efforts by businesses to adjust their stockpiles to more closely match their sales is probably ending and will be followed by increased restocking, which would deliver a boost to GDP in coming quarters.
“Businesses have overdone the inventory reductions, and that is likely to reverse in the third quarter,” said Nariman Behravesh, chief economist at IHS Global Insight.
The U.S. economy grew at just 1.2 per cent in the second quarter.