Washington, DC, July 30--Economic growth decelerated to a slower-than-expected pace in the second quarter as consumer spending fell to its weakest rate since the recession three years ago.
Gross domestic product, the total output of goods and services, increased at a 3% annual rate from April to June, the Commerce Department said Friday, from a revised 4.5% pace in the first quarter. The report showed gauges measuring prices rose slightly higher.
Economists had expected a growth rate of 3.6% this spring, according to a survey by Dow Jones Newswires and CNBC.
The unexpectedly sharp drop raised the issue of whether the economy, which Federal Reserve Chairman Alan Greenspan said last week had encountered a "soft patch" in June, could be in danger of seeing growth falter even more in coming quarters.
A key component of GDP is consumer spending, which accounts for about two-thirds of economic activity. Spending by consumers rose 1%, after a 4.1% increase in the previous quarter. The second-quarter increase was the weakest since a 1% advance in the second quarter of 2001.
Purchases of durable goods, items meant to last three years or more, decreased 2.5%, after a 2.2% gain in the prior period. Nondurable purchases slipped 0.1%, after a 6.7% gain.
The price index for gross domestic purchases climbed at a 3.5%, on par with a 3.4% in the prior quarter. The government's price index for personal consumption rose at a 3.3% rate for a second straight month. The chain-weighted price index rose at a 3.2% pace, following a 2.8% increase.
Business investment, however, more than doubled to 8.9% from 4.2%. Investment in nonresidential structures went up 5.2%, after decreasing 7.6% in the first quarter. Spending on equipment and software rose 10%, after an 8% gain.
Businesses increased inventories by $47.5 billion, after a $40 billion boost. The change in inventories added 0.28 of a percentage point to GDP growth.
Real final sales of domestic product -- that is, GDP less the change in private inventories -- advanced at a 2.8% annual rate, after a 3.3% pace.
Exports rose by 13.2%; imports advanced by 9.3%.
Federal government spending edged up 2.7%, compared with a 7.1% climb; state and local government spending rose 2.1%.
The Commerce Department also released benchmark revisions back to the first quarter of 2001, which showed a different pattern than the previously seen three quarters of decline. The revision was expected to fuel debate about when the recession actually started.
The new data showed that the GDP fell 0.5% in the first quarter of 2001, then rose at a 1.2% pace in the second quarter, and fell at a 1.4% rate in the third quarter. The old 2001 data had GDP falling at annual rates of 0.2%, 0.6%, and 1.3% in the first through third quarters, respectively.
