The American economy hit the brakes in the second quarter, as activity declined in an increasingly skittish industrial sector and exports fell, but the US continues to outperform other advanced economies, according to government data released Friday.
Officials also slashed growth for last year using newly available data — cutting a crucial 2018 GDP measure to 2.5 per cent, undercutting President Donald Trump’s frequent boasts about beating 3.0 per cent.
The new data covering the past five years now show the world’s largest economy actually slowed in the year after Trump pushed through a sweeping tax overhaul.
The updated data also highlight how momentum deteriorated in the final months of 2018, when the Federal Reserve raised interest rates in defiance of intense pressure from Trump.
The central bank next week is widely expected to cut its benchmark lending rate, reversing December’s increase.
The Commerce Department reported that GDP in the April-June quarter slowed to 2.1 per cent from the first three months of the year, slowing sharply from 3.1 per cent growth in the first quarter, but that was better than expected, helped by strong consumer spending.
Taken together the new data portrayed an economy that enjoys robust strength in some quarters but has begun to sputter worryingly in others, even while the US is outshining sluggish economies in Europe, Japan and elsewhere.
Analysts had expected second quarter growth of just 1.8 per cent, but the economy got a boost from strong consumer spending on autos, food and clothing.
Federal spending also took its biggest leap in a decade — with non-defense spending rising at the fastest pace in 21 years — a one-time jolt when the government resumed paying employees following the five-week partial government shutdown at the start of the year.
But that was not enough to make up for tumbling investment in factories and commercial buildings, which sank more than 10 percent for the quarter, and falling income from software royalties and other intellectual property.
Amid a global economic slowdown, weakening foreign demand for US exports meant American factories sold fewer autos, parts and factory equipment. The ailing American manufacturing sector also produced fewer non-durable goods while retail and wholesale trade softened.