WASHINGTON, July 30 (AFP) - US economic growth screeched to a 3.0 percent annual rate in the second quarter, far slower than expected, as consumer spending hit the brakes, government figures showed Friday.
The expansion decelerated to the slowest pace since the first quarter of 2003, the Commerce Department figures showed, crushing private economists' predictions of solid 3.7 percent growth.
The economy grew 4.5 percent in the first quarter, however, faster than previously thought.
Consumer spending growth, which accounts for two-thirds of US economic activity, slowed dramatically to a 1.0 percent pace from 4.1 percent, the slowest since the second quarter of 2001, when the United States flirted with recession.
The soggy economic report was the latest in a series indicating the United States hit a soft patch in summer, although most analysts predict healthy, moderate growth in the second half of 2004.
Signs of more persistent weakness would be a deep concern to President George W. Bush, locked in a neck-and-neck race with Democratic challenger John Kerry ahead of the November 2 presidential elections.
A weakening performance by the consumer likely cements expectations that the Federal Reserve will move gradually as it raises key short-term interest rates in a pre-emptive shot at inflation.
Some analysts even predict the tightening cycle may be halted if the consumers buckle further in July.
Federal Reserve chairman Alan Greenspan said last week, however, that the slowdown in consumer spending should be "short-lived," indicating his determination to keep pushing rates higher.
Among the key findings:
-- Business investment jumped 8.9 percent in the second quarter, up from 4.2 percent in the first, as Corporate America apparently began to shoulder some of the economic load carried by consumers.
-- Investment in housing soared 15.4 percent, up from a rise of 5.0 percent in the first quarter.
-- Exports surged 13.2 percent as imports gained 9.3 percent.
-- Federal government spending climbed 2.7 percent. State and local government expenditure rose 2.1 percent.
-- Businesses increased their stockpiles by 47.5 billion dollars, boosting the increase in the rate of GDP by 0.28 percentage points.
-- Final sales, a measure of demand in the economy, grew 2.8 percent.
Inflationary pressures appeared stable or slightly higher.
The so-called gross domestic product (GDP) deflator rose 3.2 percent, after a 2.8 percent gain in the first quarter.
A key measure of prices paid by consumers, the personal consumption expenditure (PCE) deflator, was steady at 3.3 percent. Stripping out energy and food, the PCE deflator rose 1.8 percent, down from 2.1 in the first quarter.