US Q2 GDP revised down to annualised rate of 2.6 pct from 2.9 pct

The US economy hit the brakes harder than expected in the second quarter after racing ahead in the first three months of the year, the Commerce Department said Thursday. The department estimated the economy grew at a 2.6 pct annualised rate between April and June, compared to last month's estimate of 2.9 pct annualised growth. In the first quarter, the economy grew at a 5.6 pct annual rate. Economists had been expecting second quarter growth to remain at 2.9 pct. The department said the slower estimates were partly because businesses in the second quarter grew their inventories more slowly than they had previously estimated. Consumer spending, which accounts for as much as two-thirds of the economy, rose an unrevised 2.6 pct in the second quarter, compared to a 4.8 pct increase in the first quarter. Final sales rose 2.1 pct in the in second quarter, slightly slower than the 2.3 pct estimated last month and less than half the 5.6 pct rise in the first three months of the year. The PCE price index rose 4.0 pct in the quarter, slightly slower than the 4.1 pct estimated last month. The index rose 2 pct in the January to March period. The Federal Reserve's preferred measure of inflation, the core PCE price index, which excludes volatile food and energy prices rose a revised 2.7 pct in the quarter, down slightly from the 2.8 pct estimated last month. It rose 2.1 pct in the prior three months.

Economic growth clocked in at a 2.6 percent pace in the spring, even slower than previously thought. The latest reading on the gross domestic product, released Thursday by the Commerce Department, reinforced expectations that the economy is settling into a spell of somewhat sluggish activity. The growth rate was weaker than the 2.9 percent figure estimated for the April-to-June quarter a month ago. Many economists were predicting that this estimate would hold and thus there would be no revision to the overall GDP figure. Gross domestic product measures the value of all goods and services produced within the United States and is considered the best barometer of the country' economic standing. The government said the downgraded reading for the second quarter was mostly related to less inventory building by businesses. Still, the weakness in the housing sector was vivid. Investment in home building plunged at an annualized rate of 11.1 percent in the spring, the most in 11 years. The second-quarter slowdown comes after the economy sprinted ahead in the first three months of this year, expanding at a 5.6 percent pace, the strongest spurt in 2 1/2 years. The economy has shifted into a slower gear due to a number of factors, including the cooling of the once sizzling housing market, the toll of once surging energy prices and the impact of the Federal Reserve's two-year string of interest rate increases. Economic growth is expected to stay somewhat subdued through the rest of this year. The National Association for Business Economics is forecasting the economy to expand at a pace of 2.6 percent in the current July-to-September quarter and in the final three months of the year. With the November elections looming, voters' perceptions of the economy's health may influence their choices at the polls. President Bush's approval rating on the economy is at 39 percent, according to an AP-Ipsos poll. That remains near his lowest ratings.