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Wednesday 05th of August 2009
July 28, 2006

Slowdown in US economic growth


by Elaine Frei

The US Commerce Department issued a report on Friday showing that the US economy grew less in the second quarter than analysts expected it to. Growth was at an annual rate of 2.5 percent in the April/May/June quarter, lower than the 3 percent that had been expected and much lower than the 5.6 percent growth in the first quarter of the year.

The deceleration came from declines in both consumer spending and business investment. The growth of consumer spending was at 2.5 percent in the second quarter, as opposed to 4.8 percent growth in the first quarter as not as many people were willing to spend money on durable goods. Among businesses, purchases of equipment and software was down 1 percent in the second quarter after having been up by 15.6 percent in the first quarter.

The news of the slowdown in growth aided equity markets, but yields on government bonds were down and the dollar weakened in response to the new numbers. After the release of the report, analysts put the chance that the US Federal Reserve will raise interest rates again in August at 30 percent. Previously, the chance of a rate hike in August was put at 46 percent.

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