Published Date: 7/21/2012
The U.S. economy probably expanded in the second quarter at the slowest pace in a year as a weaker labor market prompted Americans to cut back on their spending, economists said before a report this week.
Gross domestic product, the value of all goods and services the nation produced, rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of 70 economists surveyed by Bloomberg News. Factory orders softened and new-home sales were little changed, other data may show.
Consumer purchases, which account for about 70 percent of the world’s largest economy, are weakening at a time Europe’s debt crisis and looming U.S. tax-policy changes threaten to further restrain corporate investment. The deceleration in growth, a concern Federal Reserve Chairman Ben S. Bernanke highlighted last week, will make it harder to trim unemployment stuck above 8 percent since February 2009.
“We’re seeing weak numbers pretty much across the board,” said Michael Hanson, a senior U.S. economist at Bank of America Corp. in New York. “Softening consumption is definitely a big part of the slowdown. The uncertainty over Europe and the fiscal cliff will impinge on business decisions and activity.”
A projected 1.3 percent gain in second-quarter household spending would be the smallest in a year and follow a 2.5 percent rise in the January to March period, according to the median projection ahead of the GDP release by the Commerce Department on July 27.
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