U.S. economy slowed in Q2

The U.S. economy tailed off in the second quarter, new data showed Thursday.

The Commerce Department reported the gross domestic product — the value of all goods and services produced in the U.S.— expanded at a feeble 1.7 per cent annual rate in the April-to-June quarter.

The new reading is a notch higher than the 1.6 per cent growth rate the government estimated a month ago.

For each quarter, the government makes three estimates of GDP and revises the figures as more complete data comes in.

Thursday's was the third and final estimate for the second quarter. The government makes its first estimate of the economy's third-quarter performance at the end of October.

The 1.7 per cent figure is a sharp slowdown from the 3.7 per cent growth rate logged in the first quarter.

It also means the economy has expanded at a slower pace every quarter since late 2009.

Americans just aren't spending at a robust pace to bulk up companies' sales and make them confident enough to beef up hiring. Consumers and businesses, battered by the worst recession since the 1930s, are clinging to their cautious ways.

Consumers, in particular, are paring down debt, aren't spending as much as they normally do during an economic recovery and are saving more. Their spending accounts for about 70 per cent of economic activity, so their frugal behaviour explains why the economy is stuck in a slow-growth rut.

In the second quarter, Americans saved 5.9 per cent of their disposable income, the most in a year. Before the recession, they saved just 2.1 per cent.

Much of the dropoff in GDP came from a widening trade deficit, the agency said. A surge in imported goods swamped growth in U.S. exports to other countries and shaved 3.5 percentage points off output. That's the highest amount since 1947.