Business

US economic growth slows to 2.4%

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Media captionConsumers fear the recovery will be very slow and painful

US economic growth slowed between April and June, with GDP growing by an annualised rate of 2.4%, the US Commerce Department has said.

This compares with an annual rate of 3.7% in the previous quarter.

The second quarter figure is a first estimate, and could be revised either up or down in the coming months.

There are growing fears about the strength of the US economic recovery, particularly concerning the country's high unemployment rate of 9.5%.

Despite the slower rate of growth, economic adviser to the White House Christine Romer said: "This solid rate of growth indicates that the process of steady recovery from the recession continues.

"Nevertheless, faster growth is needed to bring about substantial reductions in unemployment."

Upward revision

A large increase in imports and a fall in sales of goods such as cars partly explain the slowdown in GDP growth, while personal consumption grew at a slower rate than in the first quarter.

These factors more than offset an increase in spending on property construction, as Americans looked to take advantage of tax credits for home buyers that expired during the quarter.

The Commerce Department also revised its previous estimate for growth in the first three months of the year up sharply, from 2.7% to 3.7%.

"The economy entered the second quarter with plenty of momentum, but exited with very little," said Nigel Gault, chief US economist at IHS Global Insight.

The US economy has now grown for four straight quarters.

'Weakening environment'

The second quarter GDP growth figure was slightly lower than analysts' expectations.

As a result, the main Dow Jones index fell more than 100 points in early trading, before swiftly recovering to 10,427.57, 40 points down on the day.

"This number will cast a pall on today's trading," said Jack Ablin at Harris Private Bank.

He also expressed commonly-held fears that growth could slow further as government stimulus measures are withdrawn.

"My sense is that we're operating in a weakening environment without the help of a lot of stimulus. If the stimulus package was a box of doughnuts dumped on the economy, we only have one or two doughnuts left in the box."

The US pumped hundreds of billions of dollars into the economy during the downturn to try to stimulate demand.

Earlier on Friday, the International Monetary Fund (IMF) said that the US might have to increase its stimulus spending to support the recovery.

It said the US "economic recovery has been slow by historical standards" and warned that "the outlook remains uncertain".

"Thanks to a massive policy response to the worst financial crisis since the Great Depression, the US economy is recovering, but further decisive policy action will be needed to address the policy challenges stemming from the crisis," the IMF warned.

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