US economic growth slowed abruptly during the second quarter to less than half the pace seen at the beginning of the year, the Commerce Department said today.
Gross domestic product grew at a 2.5 per cent annual rate in the April-June quarter, well below Wall Street analysts' forecasts for 3 per cent and less than half the robust 5.6 per cent rate registered in the first quarter.
Slower consumer spending, especially on costly durable goods like new cars, was a key reason for slower expansion.
At the same time, an inflation gauge favoured by the Federal Reserve - a measure of personal consumption expenditure prices minus food and energy - jumped at a 2.9 per cent rate in the second quarter, well ahead of the first quarter's 2.1 per cent.
Department officials said it was the fastest rate of increase for the gauge in nearly a dozen years, since the third quarter of 1994 when it jumped at a 3.2 per cent rate.
The economy had been widely expected to slow after a sizzling first quarter, in part because a cooling housing market coupled with soaring gasoline prices is expected to act as a brake on consumer spending.
Federal Reserve Chairman Ben Bernanke told Congress last week he expected softer growth to restrain inflation over time, though it was not apparent in Friday's second-quarter GDP data.