WASHINGTON The U.S. economy expanded at a sluggish pace this spring as businesses sharply reduced their stockpiles of goods and spent less on new buildings and equipment.
The Commerce Department said Friday that gross domestic product, the broadest measure of the economy, increased at an annual rate of 1.1 percent in the April-June quarter. That is slightly below its previous estimate last month of 1.2 percent growth.
Consumers offset the corporate cutbacks by spending at the fastest pace in six quarters. That suggests steady job growth and modest pay gains are fueling healthy demand that could spur faster growth in the second half of this year.
The economy has expanded at a lackluster 1 percent annual pace in the first half of this year, following growth of 2.6 percent last year. This year’s sluggish first half is a stark reminder of the economy’s inability to achieve strong, sustainable growth since the recession ended seven years ago. It has been the slowest recovery since World War II, and followed the worst downturn since the 1930s. Growth hasn’t topped 3 percent for a full year since 2005.
The economy stumbled early this year as consumers spent cautiously in the first three months of the year. Slow overseas growth and a stronger dollar held back exports. Stock markets gyrated amid signs that China’s economy, the second-largest in the world, was slowing.
In the second quarter, U.S. businesses cut their stockpiles at the fastest pace since the fall of 2011.
Yet with consumers spending at a robust pace, businesses will likely have to restock their warehouses and store shelves with more goods. That should help accelerate growth to a 2.5 percent annual pace in the third and fourth quarters.
Despite weak growth, businesses hired at a strong pace in June and July. There are also signs incomes are rising, particularly for lower-paid workers. Those trends should help growth accelerate in the coming months.
Yet the strong hiring amid weak growth highlights a broader shortcoming of the economy: It has become less efficient and productive since the recession. American businesses may be hiring in part because it takes more workers to raise output even a modest amount.