The U.S. economy grew less-than-expected in the second quarter as business were cautious on investment, raising concerns about the risk of recession.
Gross domestic product, the total value of goods and services in the nation, rose at 1.2 percent annualized rate in the second quarter, the Commerce Department said Friday. The figure is disappointing. Analysts’ surveyed by The Wall Street Journal had projected the 2.6 percent growth. The department also revised down first-quarter growth to 0.8 percent from 1.1 percent.
This is the third straight quarters the economy has grown at less than a 2 percent pace. The disappointing figure raised people’s concerns about effect of stimulation since the recession ended seven years ago.
In the second quarter, consumer spending, which accounts for more than two-thirds of economic output, rose 4.2 percent. This marks the best gain since late 2014.
But nonresidential fixed investment, a measure of business spending, dropped at a 2.2% pace. The figure shows that companies are cautious about investment and they spent less on buildings and equipment. This also marks the third straight quarterly drop.
The report raised risk of the decision of the future rate hike. The fed has been kept the low interest rate for a long time, but the economy still shows risk of entering another recession. In the other hand, the price index for personal consumption expenditures rose at a 1.9% from the prior quarter. The figure is only slightly below the Fed’s target of a 2% annual inflation rate. Policy makers are very difficult to make the decision. Whether to increase interest rate to control inflation or remain interest rate unchanged to stimulate ecomony.