U.S. econ­omy ex­pected to pick up af­ter weak growth in spring

The Hamilton Spectator - - BUSINESS - MARTIN CRUTSINGER

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.

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