The US economy slowed more sharply than expected in the second quarter as shoppers curbed their free-spending ways amid a sharp advance in energy prices.
US gross domestic product, a measure of total output within the nation's borders, climbed at a modest 3 per cent annual pace in the April-June period after an upwardly revised 4.5 per cent clip at the start of the year, the Commerce Department said.
Wall Street economists had looked for GDP to advance at a 3.6 per cent pace after the previously reported rise of 3.9 per cent in the first quarter. While the latest quarter proved weaker than expected, some recent signs suggest the economy's pace has already quickened.
Still, the tepid second-quarter figure is no boon for President George W. Bush, who would like to see a stronger expansion as the November presidential election approaches.
Consumer spending rose at just a 1 per cent rate in the second quarter, a mere shadow of the robust 4.1 per cent first-quarter gain and the slowest increase since 2001, when the economy was in recession.
Economists had looked for a consumer-led slowdown, but could be surprised by the extent shoppers pulled in their horns.
Big energy price hikes were one factor analysts have pointed to in explaining why consumer spending slackened in the spring. Friday's data showed inflation - gauged by a measured favored by policymakers at the Federal Reserve - rose at a relatively high 3.3 per cent rate in the second quarter, matching the first-quarter's pace.
Stripping out at-times volatile food and energy prices, that gauge, the price index for consumer spending, climbed at only a 1.8 per cent rate, a slowdown from a 2.1 per cent increase in the first quarter.
Fed officials have expressed concern over the extent to which prices have surged this year, but have argued that broad-based and sustained price pressures are unlikely to build until the unemployment rate is brought down.
The GDP report showed growth in business outlays advanced at a solid 8.9 per cent pace, more than doubling the rise in the January-March period. Firms continued to build inventories, but the amount stockpiled was only slightly ahead of the first quarter and offered just a slight boost to second-quarter growth.