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GDP rises 1.8% in 2Q
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August 26, 1999: 10:09 a.m. ET
Jump in imports cools off hearty U.S. growth, as expected; 3Q seen strong
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NEW YORK (CNNfn) - U.S. economic output increased 1.8 percent in the second quarter, the government said Thursday, as surging imports and trimmer business inventories slightly cooled the hot American economy.
The revised figures from the U.S. Commerce Department were down from the 2.3 percent first reported last month, but were in line with the expectations of economists polled. The 1.8 percent annual rate was the slowest in a year -- matching the rate of growth in the second quarter of 1998.
The index's implicit price deflator, a key sign of whether inflationary pressures are appearing in the economy, rose 1.5 percent, short of the 1.6 percent level first reported. Economists had expected a rise of 1.6 percent.
One economist said the second-quarter easing of growth sets the stage for a return to solid growth in the third quarter.
"Exports are rising, and exports are likely to continue to do better as we move through the second half because of recovering economies abroad," said Paul Kasriel, chief U.S. economist at Northern Trust. "So I think this really, especially with the inventories, sets up for a strong rebound in third quarter GDP, conservatively something along the lines of 3.75 percent."
A 14.4 percent jump in imports, which means Americans are purchasing more products made overseas, was a key drag on the GDP figure. A 4.3 percent gain in exports, which means U.S. firms are producing more, was unable to make up for that.
Meanwhile, U.S. businesses increased their inventories at a $12.1 billion annual rate, instead of the $19.4 billion estimated a month ago. That was less than a third the $38.7-billion rate of addition to inventories made in the first quarter.
The bond market, which also examined a report showing an unexpectedly low number of first-time claims for jobless benefits, headed lower. The benchmark 30-year Treasury issue was down 1/32 in price, for a yield of 5.85 percent.
Americans' appetite for goods remained strong. Consumer spending, which fuels two-thirds of the nation's economic growth, increased a faster-than-expected 4.6 percent, versus the 4 percent reported last month, but still down from the 6.7 percent rate in the first quarter this year.
The report comes just two days after the Federal Reserve's policy-making committee boosted short-term interest rates by a quarter point but said it will maintain its "neutral" bias. 
-- from staff and wire reports
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