WASHINGTON - The economy grew at a much slower pace this spring than previously estimated, mostly due to the largest surge in imports in 26 years and a slowdown in companies' restocking of goods.
The nation's gross domestic product - the broadest measure of the economy's output - grew at a 1.6 percent annual rate in the April-to-June period, the Commerce Department said Friday. That's down - although not as much as expected - from an initial estimate of 2.4 percent last month and much slower than the first quarter's 3.7 percent pace.
Shortly after the revision was announced, Federal Reserve chairman Ben Bernanke said the Fed will consider making another large-scale purchase of securities if the slowing economy deteriorates significantly. Bernanke described the economic outlook as "inherently uncertain."
He gave a detailed analysis of the economy and said growth during the past year has been "too slow" and unemployment too high. Even so, he said a handoff from fiscal stimulus and inventory restocking to consumer spending and business investment "appears to be under way." The Fed chairman noted that the risk of an "undesirable rise in inflation or of significant further disinflation seems low."
The lower estimate for economic growth and Bernanke's comments follow a week of disappointing economic reports. The housing sector is slumping badly after the expiration of a government homebuyer tax credit. And business spending on big-ticket manufactured items such as machinery and software, an important source of growth earlier this year, is also tapering off.
Most analysts expect the economy will grow at a similarly weak pace for the rest of this year. "We seem to be in the early stages of what might be called a 'growth recession,' " said Ethan Harris, an economist at Bank of America-Merrill Lynch.
The widening trade deficit subtracted nearly 3.4 percentage points from second quarter growth, the largest hit from a trade imbalance since 1947, the government said.
Many economists expect that impact to lessen in the coming quarters. As businesses pare back their spending on inventories and reduce investment in new equipment, imports should decline.
The economy has grown for four straight quarters, but that growth has averaged only 2.9 percent, a weak pace after such a steep recession. The economy needs to expand at about 3 percent just to keep the unemployment rate from rising.
Business investment in new machinery, computers and software drove much of the growth last quarter, increasing nearly 25 percent. But much of that spending involved the purchase of imported goods. Imports surged 32.4 percent, the most since 1984. That overwhelmed a 9.1 percent increase in exports.