Economy expands at sluggish 1.1 percent pace

The U.S. economy expanded at a sluggish 1.1 rate in the second quarter, a slightly slower pace than first reported.

The Commerce Department blamed the tepid figures on a reduction in businesses inventories. It had previously estimated a 1.2 percent expansion in gross domestic product between April and June.

The figures could give ammunition to Republican presidential nominee Donald Trump, although separate jobs reports may have more bearing on the presidential race.

The unemployment rate is 4.9 percent and economists are forecasting that the economy could reach full employment by year’s end, presenting a new challenge for the next presidential administration: a tight labor market.

{mosads}Inventory investment — a volatile component of GDP — subtracted 1.3 percentage points from growth in the second quarter, the White House said.

“Overall, second-quarter growth in the most stable and persistent components of output — consumption and fixed investment — was revised up to 3 percent,” said Jason Furman, chairman of the Council of Economic Advisers.

“Today’s report underscores that there is more work to do, and the president will continue to take steps to strengthen economic growth and boost living standards by promoting greater competition across the economy; supporting innovation; and calling on Congress to increase investments in infrastructure and to pass the high-standards Trans-Pacific Partnership,” Furman said.

Fixed investment declined on a reduction in spending on equipment and structures and residential investment dropped following eight straight quarters of increases.

Consumers bolstered the otherwise sluggish growth behind steady jobs and wage growth that could contribute to a faster expansion in the second half of the year. 

Spending, which accounts for about 70 percent of the economy, grew strongly at a 4.4 percent rate in the spring, the second-fastest quarterly growth since 2006.

That level of spending might be enough to convince businesses to ramp up supply to meet increasing demand.

Much of the spending growth came from purchases of big-ticket items like cars.

Exports also added to growth during the quarter.

Growth is expected to rebound in the final six months of this year, with forecasts coming in around 3 percent for the July-September quarter.

The economy grew at only a 0.8 percent pace in the first three months of the year.