US economy: Growth slows to 2.4% as consumer spending decelerates

The US economy slowed in the second quarter as a scarcity of jobs eroded consumer spending, leaving the rebound dependent on a surge in business investment.

Gross domestic product grew at a 2.4 per cent annual pace, less than forecast, after a 3.7 per cent first-quarter gain that was larger than previously estimated, according to Commerce Department data issued today in Washington. Other reports showed business activity unexpectedly accelerated in July and consumer sentiment fell less than projected.

“The economy is muddling through,” Ethan Harris, head of North America economics at Bank of America-Merrill Lynch Global Research in New York, said in an interview. “We’re probably not going to see a really strong number for a while. We need to see some pickup in job growth.”

Stocks fluctuated between gains and losses as the reports on confidence and on activity by Chicago-area business managers eased concern the economic rebound was losing steam. Efforts to diversify from consumers to businesses is among reasons why companies like Amazon.com are pouring money into new plants and equipment, which is helping sustain growth.

The median forecast of 81 economists surveyed by Bloomberg News projected a 2.6 per cent second-quarter growth rate. Estimates ranged from gains of 1 per cent to 4 per cent.