WASHINGTON — The U.S. economy slowed sharply in the April-June quarter even as consumers stepped up their spending.
The gross domestic product, the economy's total output of goods and services, grew at a 2.1% annual rate last quarter, down from a 3.1% gain in the first quarter, the Commerce Department estimated Friday.
But consumer spending, which drives about 70% of economic activity, accelerated to a sizzling 4.3% growth rate after a lackluster 1.1% annual gain in the January-March quarter, boosted in particular by auto sales. The resurgent strength in household spending was offset by a widening of the trade deficit and slower business inventory rebuilding.
Economists also noted that business capital investment fell in the April-June quarter for the first time in three years. That weakness likely reflects some reluctance by businesses to commit to projects because of uncertainty surrounding President Donald Trump's trade war with China.
Indeed, most analysts think the U.S. economy could slow through the rest of the year, reflecting global weakness and the trade war between the world's two largest economies.
This week, the International Monetary Fund downgraded its outlook for the world economy because of the trade conflict. China's own growth sank last quarter to its lowest level in at least 26 years after Trump raised his tariffs on Chinese imports to pressure Beijing over the tactics it's using to challenge U.S. technological dominance. Economists say China's slowdown might extend into next year, which would have global repercussions because many countries feed raw materials to Chinese factories.
Europe, too, is weakening in the face of global trade tensions - a concern that led the European Central Bank to signal that more economic stimulus could be coming soon.