The U.S. economy's production of goods and services slowed sharply in the April-June quarter, hurt by lost trade to Asia and a prolonged strike at the nation's largest corporation.
The gross domestic product - the sum of goods and services produced within U.S. borders - increased at a modest 1.4 percent annual rate, the Commerce Department said Friday.That's down sharply from the torrid 5.5 percent rate during the first three months of the year. Nevertheless, it wasn't nearly as bad as many analysts expected. Some had thought the economy's output actually had decreased for the first time since the 1990-91 recession rather than just slowed.
Still, it was the most sluggish quarter in three years and at least temporarily interrupted a remarkable run of robust growth unseen in this country since the economy was climbing out of the deep slump of the early 1980s.
Strikes at General Motors and auto-parts manufacturing plants, which idled 200,000 workers and were settled just this week, subtracted a full percentage point from second-quarter growth.
And the sharpest deterioration in the nation's trade balance on record subtracted 2.4 percentage points. Exports fell at an 8 percent annual rate, largely because economically troubled Asian countries no longer can purchase as many U.S. goods. And imports grew at an 11.9 percent rate as U.S. manufacturers struggled to compete against Asian goods made cheap by sharp currency devaluations.
Reflecting both the strike and the slump in trade, production of goods for inventory decreased sharply after soaring in the first quarter.
With Asia still shaky and with GM out of commission for nearly all of July, economists believe economic growth in the July-September quarter also will be subdued. But, they forecast a rebound during the final three months of the year.
"It will be a sort of Twinkie year," said economist David Wyss of Standard & Poor's DRI in Lexington, Mass. "Soft in the middle."
On the positive side for the second quarter, inflation all but disappeared. A price measure tied to the GDP rose at a 0.8 percent annual rate, the smallest increase since 1963.
The economy remained healthy in many other ways as well. Consumer spending increased at a brisk 5.8 percent annual rate, down only slightly from the 6.1 percent rate of the first quarter. Consumer purchases of big-ticket items from cars to computers increased at a 10 percent rate, down from 15.8 percent.
And businesses continued to spend heavily on new equipment - especially computers. Equipment spending rose at a 17.8 percent annual rate. That's not nearly as rapid as the 34.3 percent rate of advance in the first quarter, a near 15-year record, but still very strong.