US GDP underscores weak first-half growth

Posted on August 26, 2016

Federal Reserve Jackson Hole Economic Symposium...National Park Rangers stand silhouetted inside the lobby of Jackson Lake Lodge during the Jackson Hole economic symposium, sponsored by the Federal Reserve Bank of Kansas City, in Moran, Wyoming, U.S., on Thursday, Aug. 27, 2015. The symposium gathers central bankers, finance ministers, academics, and market participants to discuss the theme of "Inflation Dynamics and Monetary Policy". Photographer: David Paul Morris/Bloomberg©Bloomberg

The US economy grew at a slightly slower rate than initially forecast in the second quarter, underscoring the weak performance in the first half of 2016.

The economy expanded at an annualised rate of 1.1 per cent in the second quarter, compared with a previous estimate of 1.2 per cent, the Commerce Department said.

    The weakness in the second quarter capped what was a disappointing first half of 2016 for the world’s biggest developed-market economy, which expanded at a slim 0.8 per cent rate in the first three months of the year.

    Economists reckon the economy may have picked up steam more recently. Indeed, the growth rate has accelerated to 3.4 per cent in the third quarter, according to a running forecast by the Atlanta Federal Reserve.

    The more upbeat outlook for economic output that is coupled with a tightening labour market and signs that inflation is firming has increased expectations that the Fed may increase interest rates at least one time this year following the December 2015 rate rise.

    Markets pin the odds of a 2016 rate rise at 55.8 per cent, according to federal funds futures, up dramatically from late June when the fierce reaction to the UK’s Brexit vote sent the probability plunging to essentially nil.

    A speech from Fed chair Janet Yellen at the Jackson Hole gathering of central bankers slated for later on Friday was expected to garner significant attention and may provide more clues to the central bank’s policy plans.

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