US growth slows as trade war weighs on businesses

WASHINGTON • United States economic growth slowed in the second quarter as consumer spending rose, though weaker business investment and exports underscored the risks spurring the Federal Reserve towards an interest rate cut. Gross domestic product (GDP) expanded at a 2.1 per cent annualised rate, according to Commerce Department data yesterday that topped forecasts for 1.8 per cent.

Consumer spending, the biggest part of the economy, increased 4.3 per cent, while government spending climbed 5 per cent and offered the biggest boost in a decade. Non-residential investment fell 0.6 per cent for the first drop since 2015 and residential investment decreased for the sixth straight period.

Treasury yields rose as the data probably reduced chances of a half-point Fed interest rate cut next week instead of the expected quarter-point.

The mixed report highlights how President Donald Trump is enjoying signs of a solid economy while his trade war with China weighs on the expansion and fuels uncertainty for global businesses.

Revised data released yesterday showed the economy missed his 3 per cent growth goal last year, after previous data had showed it matching.

Yesterday's report showed fresh evidence that trade is weighing on the expansion as exports fell 5.2 per cent while imports rose just 0.1 per cent. Overall growth on a year-over-year basis slowed to 2.3 per cent, the weakest pace in two years.

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A version of this article appeared in the print edition of The Straits Times on July 27, 2019, with the headline US growth slows as trade war weighs on businesses. Subscribe