But the rather optimistic report released by the U.S. Department of Commerce on Friday sounded an alarm for 10 years of economic growth, the longest economic growth cycle on record. Enterprise investment contracted for the first time in more than three years, and the housing market declined for the sixth consecutive quarter.
Earlier this month, Federal Reserve Chairman Powell pointed out that these two sectors are weak areas of the U.S. economy. These weak areas are likely to provide further justification for the Fed's first interest rate cut in 10 years next Wednesday, as the fierce trade war between the United States and China and the growing risks posed to the U.S. economic outlook by the slowdown in global economic growth.
"The key to future economic growth is enterprise expenditure. Obviously, businesses are not as enthusiastic as consumers, "says Sung Won Sohn, professor of economics at Loyola Marymount University. "This is not a good sign for the economy, because consumers will have fewer jobs. So the Fed will cut interest rates next week.
The Fed is widely expected to cut interest rates by 25 basis points at its July 30-31 meeting.
Gross domestic product (GDP) grew at an annualized rate of 2.1% in the second quarter, less than the 3.1% increase confirmed in January-March. Economists interviewed by Reuters had predicted GDP would grow by 1.8% in the second quarter. They estimate that the U.S. economy can grow at a long-term rate of 1.7% to 2.0% without causing inflation.
President Trump downplayed the impact of the slowdown and blamed the Federal Reserve for the loss of momentum. The Trump government is trying to boost the economy through massive tax cuts, government spending and deregulation.
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