Thursday 26 April 2018

US economy 'growing at half expected pace'

Sam Fleming

AMERICA'S economy may have grown at only half the pace previously pencilled in for the April-to-June quarter, forecasters said in advance of official figures due next week.

The predicted downgrade comes after France admitted yesterday that its own growth outlook was looking more sluggish, as the Elysee Palace cut its growth forecast for 2011 from 2.5pc to 2pc.

Revised GDP figures from the United States reflected the ill-effects of poor trade figures and weak inventory data.

According to HSBC's chief US economist Kevin Logan the annual rate of second-quarter growth was likely to be slashed from 2.4pc to only 1.3pc.

That figure translates to a quarter-on-quarter growth rate of only 0.3pc, putting the US only marginally ahead of Spain and Portugal, which reported GDP growth of 0.2pc in the same three-month spell.

The poor data may increase the odds of the US Federal Reserve adding to its quantitative easing strategy for stimulating growth.

The central bank has already lowered its official rate to nearly zero and purchased $1.5trillion of assets -- equating to more than 11pc of GDP -- in an effort to propel the US out of its economic mire.

Part of the reason for the dismal US figures is a surging trade deficit that risks fanning tensions with China over the undervalued yuan.

The US trade deficit soared by 18.8pc between May and June to $49.9 billion (€39.2bn), the highest level in 20 months, as US businesses sucked in huge quantities of Chinese-made goods.

This acts as a drag on GDP growth as spending is focused on overseas suppliers.

The muted growth outlook contrasts with the position in Germany, where the Bundesbank lifted its 2011 prediction to 3pc from 2pc on Thursday.

Irish Independent

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