U.S. Q2 growth slows to 2.1 pct with further slowdown in sight

2019-07-27 16:03

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WASHINGTON, July 26 (Xinhua) -- U.S. economic growth slowed to 2.1 percent in the second quarter, the U.S. Department of Commerce said Friday, as projections point to further slowdown through next year.

The rate is a remarkable slowdown from the 3.1-percent expansion in the previous quarter.

While the growth was mainly driven by consumer and government spending, gains were offset by negative contributions from gross private domestic investment, which witnessed a drastic decline of 5.5 percent, the worst since the fourth quarter of 2015.

The growth rate of current-dollar personal income stood at 244.2 billion U.S. dollars, dropping from 269.8 billion dollars in the first quarter.

The Commerce Department also issued revisions of economic growth data over the past five years. After revision, full-year 2018 GDP growth was 2.9 percent, falling below the administration's 3-percent target.

Fed Chairman Jerome Powell told U.S. lawmakers earlier this month that concerns about the lack of momentum in global growth and uncertainties around trade tensions "continue to weigh on the U.S. economic outlook."

The latest U.S. economic data came as the International Monetary Fund (IMF) on Tuesday warned of the negative effect of tariffs on economy.

One of the "pressing needs" in terms of policy priorities, the IMF said, is to reduce trade and technology tensions.

"Specifically, countries should not use tariffs to target bilateral trade balances," it said.

Joseph Gagnon, senior fellow at the Peterson Institute for International Economics, told Xinhua that higher tariffs on imports from U.S. trading partners are downside risks to the U.S. economy.

It could get worse if the U.S. administration "slaps a lot more tariffs on a lot more countries," he said. "That would be a risk to the U.S. economy, and then to the world soon."

Meanwhile, data released by U.S. Commerce Department showed that the core personal consumption expenditures price index, an inflation gauge preferred by the Federal Reserve that excludes the volatile food and energy prices, increased 1.8 percent, continuing to undershoot the Fed's 2-percent inflation target.

The current federal funds rate is set in a target range of 2.25 percent to 2.5 percent. However, Powell had signalled a loosening of monetary policy.

CME Group's FedWatch Tool showed that the market is pricing in a 100 percent chance of a rate cut at the Fed's upcoming policy meeting on July 30-31.

However, Gagnon cautioned that the markets "may be a little carried away" on an immediate Fed rate cut.

According to Gagnon, there is a 70-percent chance that the central bank will adopt a "small rate cut" at the upcoming policy meeting.

"To say it's a done deal seems extreme," Gagnon told Xinhua.

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