Economy Expanded at 1.1% Rate in 2Q

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The U.S. economy grew at a slower pace in the second quarter than many had expected, the Commerce Department said Wednesday, reporting an increase of 1.1% in the gross domestic product.

The report said growth was held down in the months of April, May and June primarily by slower consumer spending and a worsening U.S. trade picture.

The gross domestic product is the sum of all goods and services produced in the United States and is a strong indicator of which direction the economy is heading.

The rate of growth was less than half of the expected 2.3% increase, Bloomberg reported and was the slowest increase since the third quarter of 2001 when GDP contracted by 0.3%.

In terms of actual dollars, adjusted for inflation, the U.S. gross domestic product rose to $10.37 trillion in the second quarter from $10.31 trillion in the first.

Revisions of previous data showed that the economy pulled back in the first nine months of 2001, but rose a full 5% in the first quarter of 2002.

The GDP report showed that consumer spending, which accounts for two-thirds of all U.S. economic activity and a good portion of trucking’s revenues, rose 1.9% in the second quarter – its weakest performance since the third quarter of last year.

Part of the reason for the slower spending, Bloomberg said, is a rollback in May of non-interest loans offered by car dealers. A drop-off in sales prompted many dealers to restart the practice and it has boosted auto sales in July so far.

Business spending on equipment and software grew at a 2.9% annual rate in the second quarter, recovering a 2.7% decline in the first. The increase in spending indicates a greater level of capital investment by companies, which, if it continues, could lead to more business-to-business deliveries for the trucking industry.

Economic observers, however, doubt the economy can sustain these increases as several companies have said they may not meet sales targets, Bloomberg reported.

Business inventories rose in the quarter – their first rise since the fourth quarter 2000. Rising inventories can indicate that companies are having a harder time selling their products, thus they may limit future ordering from producers.

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