Even with consumer and government spending on the rise, tariffs and a global slowdown pushed the USA economy downward in the second quarter, with the April-June GDP dipping to 2.1% following a 3.1% first-quarter gain.
A widening trade deficit and less inventory accumulation may have knocked as much as 1.7 percentage point off the headline growth figure, ING Bank NV estimated before the July 26 data.
"The biggest factor weighing on growth is a rather sizable swing downward in inventories and net exports - so they were the biggest contributors in the first quarter, and they'll be the biggest drag on the second quarter", said Ellen Zentner, chief USA economist at Morgan Stanley.
While economists see the tax cut Trump pushed through Congress in late 2017 as a key factor boosting growth last year, they expect the impact of those cuts to fade this year.
Still, businesses may feel more sanguine in the third quarter because of apparent progress in trade talks between the US and China, Birch added.
As for the image above, the chart shows GDP numbers by quarter since the Great Recession began.
"In short, this slowdown just about justifies a 25 basis points cut by the Fed next week, but the chances of a bigger 50bp reduction just receded further", he said. Economists estimate the economy's growth potential, or the pace at which it can expand without generating too much inflation, at around 2%.
Speaking to Congress earlier this month the Fed chairman, Jerome Powell, said "many" Fed officials believe a weakening global economy and rising trade tensions have strengthened the case for a rate cut.
The U.S. economy grew more-than-expected in the second quarter.
Together, those items undercut what likely was the strongest increase in consumer spending since 2014. Second-quarter growth was cut to 3.5 percent from a 4.2 percent rate.
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The $21 trillion US economy grew 3.1 percent in the first quarter.
But the decline was less than expected - thanks to a consumer spending spree - and the report showed signs that there is continuing momentum in the US's decade-long economic expansion, albeit at a slowing pace.
Spending is being supported by the lowest unemployment rate in almost 50 years, which is slowly lifting wages.
Many economists argue that such investment spending has been put off because of the uncertainty raised by Trump's trade policies, which have imposed tariffs on imports from China, Europe and Japan.
Finance and insurance, retail trade, and health care and social assistance were the leading contributors to the increase in real GDP nationally, BEA said. The price index for gross domestic purchases increased by 2.2% in the second quarter, after an increase of 0.8% in the first quarter. Spending on intellectual products, including research and development, increased.
Stocks are rebounding Friday, as the United States economy slowed less than expected in the second quarter. It is seen constrained by design problems at aerospace giant Boeing (BA.N).
Boeing reported its biggest-ever quarterly loss on Wednesday due to the spiraling cost of resolving issues with its 737 MAX airplane, grounded worldwide in March after two fatal crashes in Ethiopia and Indonesia.
The plane was grounded worldwide in March after two fatal crashes in Ethiopia and Indonesia. Production of the aircraft has been reduced and deliveries suspended.
The Trump budget had projected growth of 3% in calendar year 2018, slightly above the pace achieved.