http://economictimes.indiatimes.com/International-Business/articleshow/6239158.cms31 Jul 2010, 0153 hrs IST,REUTERS
US growth slows in Q2 on surge in imports
WASHINGTON: Economic growth slowed in the second quarter as a capital investment drive by businesses sucked in imports at the fastest pace since the first quarter of 1984. Gross domestic product expanded at a 2.4% annual rate, the Commerce Department said in its first estimate on Friday, after an upwardly revised 3.7% growth pace in the January-March quarter.
The government had previously estimated a 2.7% growth rate for the first three months of this year. “The anticipated slowdown in the economy is happening. Will business investment fall off a cliff next quarter if domestic consumer spending continues to flag?” said Lee Olver, managing director of financial strategies at Madison Williams & Co in Houston.
Growth in the last quarter was held back by a 28.8% surge in imports, which eclipsed a 10.3% rise in exports. The widening trade deficit lopped off 2.78 percentage points from growth, the largest subtraction since the third quarter of 1982. While the import surge subtracted from GDP, growing imports and robust business spending suggest strength in underlying demand.
“Imports are a bit peculiar because rising imports suggest strong demand in the economy, increased optimism. But also it’s a leakage from the US. The production doesn’t go to the US income,” said Zach Pandl, an economist at Nomura Securities.