Second quarter GDP grew at a lower-than-expected pace of 1.2 percent, despite strong consumer spending. Bobbi Rebell reports.
The U.S. economy grew only 1.2 percent in the second quarter according to the Commerce Department. That was less than half the 2.6 percent GDP growth forecast of economists polled by Reuters ahead of the release. First quarter GDP was also revised downward, to 0.8 percent from 1.1 percent. The key issue: inventory liquidation. Investment in that area fell for the first time in nearly five years. Business spending has been hurt by lower oil prices, which have squeezed profits in the energy sector, forcing companies to cut capital spending budgets. The good news - consumer spending, which makes up more than two-thirds of U.S. economic activity, increased at a 4.2 percent rate. That is the fastest since the fourth quarter of 2014. Brian Schaitkin, Senior Economist at The Conference Board saying quote: "The economy continues to operate at two speeds, with businesses feeling some uneasiness while consumers remain buoyant." A separate report from the Labor Department on Friday showed labor costs increasing at a steady 0.6 percent rate in the second quarter, matching the prior quarter's rise.