US economy grows less than thought

Corn plants damaged by drought in Nebraska Large parts of the US have been affected by droughts this year

Growth in the US economy between April and June has been revised downwards.

Gross domestic product (GDP) in the second quarter grew at an annual rate of 1.3% in the second quarter, down from the previous estimate of 1.7%.

One of the reasons for the cut was the worst drought for 50 years, which cut farm inventories, the Commerce Department said.

Analysts said that the figures available for the third quarter suggested even slower growth.

Figures on Thursday showed that demand for long-lasting manufactured goods, known as durable goods, fell sharply in August.

Official figures showed that durable goods orders fell 13.2% in the month, although that was mainly due to a big fall in orders for commercial aircraft.

Fed action

The GDP revision was the third estimate of the figure - the first estimate was 1.5% annual growth.

About half of the downward revision was due to declining farm inventories. There was also slower consumer spending and less export growth than previously thought.

On a quarterly basis, US GDP grew 0.3% in the second quarter.

"Anyone voicing doubt about the need for the Fed's recent stimulus must surely be silenced by the surprising weakness of the data now coming out of the US," said Chris Williamson, chief economist at Markit.

"More light will be shed on growth momentum at the end of the third quarter with the PMI releases next week, but the data flow so far suggest that we should be prepared for GDP growth to have slowed further from the 1.3% annualised rate seen in the second quarter."

Earlier this month, the US Federal Reserve announced a further attempt to help the economic recovery by restarting its policy of pumping money into the economy via quantitative easing.

The Fed pledged to buy $40bn (£25bn) of mortgage debt a month, with the aim of reducing long-term borrowing costs for firms and households.

The Fed said that the quantitative easing programme was open-ended and would continue until the US economy showed signs of recovery.

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