The U.S. economy probably expanded in the second quarter at the slowest pace in a year as a weaker labor market prompted Americans to cut back on their spending, economists said before a report this week.
Gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Factory orders softened and new-home sales were little changed, other data may show.
Consumer purchases, which account for about 70 percent of the world’s largest economy, are weakening at a time Europe’s debt crisis and looming U.S. tax-policy changes threaten to further restrain corporate investment. Photographer: Daniel Acker/Bloomberg
Gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Photographer: Victor J. Blue/Bloomberg
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Consumer purchases, which account for about 70 percent of the world’s largest economy, are weakening at a time Europe’s debt crisis and looming U.S. tax-policy changes threaten to further restrain corporate investment. The deceleration in growth, a concern Federal Reserve Chairman Ben S. Bernanke highlighted last week, will make it harder to trim unemployment stuck above 8 percent since February 2009.
“We’re seeing weak numbers pretty much across the board,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York. “Softening consumption is definitely a big part of the slowdown. The uncertainty over Europe and the fiscal cliff will impinge on business decisions and activity.”
A projected 1.3 percent gain in second-quarter household spending would be the smallest in a year and follow a 2.5 percent rise in the January to March period, according to the median projection ahead of the GDP release by the Commerce Department on July 27.
Retail Sales
Recent data signal consumers are reluctant to step up purchases. Retail sales fell in June for a third consecutive month, the longest period of declines since 2008. Same-store sales rose less than analysts’ estimates at retailers including Target Corp. (TGT) and Macy’s Inc. (M)
Payroll gains slowed to an average 75,000 last quarter, down from 226,000 in the prior three months and the weakest since the third quarter of 2010. The unemployment rate, which held at 8.2 percent in June, has exceeded 8 percent for 41 straight months.
The dimmer outlook for employment is taking a toll on Americans’ confidence as the economy heads into the second half of 2012. The Thomson Reuters/University of Michigan final index (SPX) of consumer sentiment fell to 72 in July, the lowest level this year, economists in the Bloomberg survey predicted ahead of the July 27 report.
“Economic activity appears to have decelerated somewhat during the first half of this year,” Bernanke said in testimony to Congress last week. The Fed is “prepared to take further action as appropriate to promote a stronger economic recovery.”