The US economy expanded more slowly than previously estimated in the second quarter, showing consumer spending was weakening before the credit crisis intensified.
The annual rate of 2.8 per cent was down from a preliminary estimate of 3.3 per cent issued last month, the Commerce Department said today in Washington. Measures of inflation were higher than previously projected. Personal consumption, trade and business investment contributed less to gross domestic product than the prior estimate, the report showed.
Americans have since cut back on purchases, businesses have put investment plans on hold, builders have scaled back and credit markets have seized up. Economists at JPMorgan Chase & Co and Morgan Stanley this week cut third-quarter GDP forecasts and Federal Reserve Chairman Ben S Bernanke warned the economy may falter without a $700 billion bank rescue.
“Consumer spending doesn't bode well for overall growth over the next few quarters,” said Russell Price, a senior economist at H&R Block Financial Advisors Inc in Detroit. “It’s pretty clear now that we are in a recession, and it’s a recession that still has some room to run.”
Treasury Yields:, Treasuries were higher, pushing yields down. The benchmark 10-year note yielded 3.8 per cent as of 8:55 am in New York, down 6 basis points from yesterday. Stock futures were lower after negotiations on the bank bailout plan stalled on Capitol Hill.
Economists had projected growth would remain unchanged at 3.3 per cent, according to the median of 76 estimate in a Bloomberg News survey. Forecasts ranged from 3 per cent to 3.7 per cent. Today’s report is the final of three estimates.
