Washington: The US economy looks like it grew more slowly than expected in the second quarter, the International Monetary Fund said in a report on Friday.
“Recent indicators point to a sharper than expected slowdown in economic activity in the second quarter,” IMF experts said following annual consultations with the US.
“This reflects weakness in inventory accumulation and net exports as well as slower private consumption growth as suggested by retail sales in June.”
The pullback in consumer spending poses a sharp drag on growth as it fuels about two-thirds of activity in the world’s largest economy.
The US government is set to release its first estimate of gross domestic growth for the second quarter on Wednesday.
First-quarter GDP growth was at a tepid annual rate of 1.8 per cent as the economy still struggles to recover from the Great Recession that ended four years ago.
However, a reporter by the University of Michigan on Friday said Americans are more confident about the economy than at any time since July 2007, suggesting consumers will spend more and accelerate growth in the months ahead.
The University of Michigan said Friday that its final reading of consumer sentiment in July was 85.1. That’s up one point from June but nearly 13 points higher than a year ago.
Rising home prices and steady job gains are boosting household wealth and income. The proportion of Americans who expect their inflation-adjusted incomes to rise in coming year is greater than at any time since late 2007, the survey found. And the per centage of Americans who say their home values have risen is also at a six-year high.
Consumer confidence is closely watched because their spending accounts for 70 per cent of growth.
The University of Michigan polls roughly 500 people throughout the month and issues two readings. Americans’ expectations for future growth dipped, while their assessment of current conditions improved.
Consumers have been resilient despite paying higher taxes this year. Their spending growth likely slowed in the April-June quarter after rising at the fastest pace in two years in the first quarter.
But with hiring solid and confidence rising, most economists forecast consumers will step up spending and help propel economic growth later this year.