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US growth forecast slashed

The US rate of economic growth during the second quarter of the year has been revised down to 1.6 per cent, according to the Bureau of Economic Analysis.

In its first estimate published last month the BEA forecast GDP had grown at an annual rate of 2.4 per cent.

The BEA’s second estimate is in line with analyst forecasts, who expected growth to be revised down to 1.5 per cent.

This week the Dow fell on the back of weak housing data and the expected downward revision to GDP growth.
Even a better-then expected fall in jobless claims did little to allay fears about America’s labour market recovery.

Paul Ashworth, an economist at Capital Economics, says yesterday that a downward revision in GDP would probably fuel fears the American economy is enduring a hard landing.

“But conditions are not quite as bad as the headline figure is likely to suggest,” he says.

“GDP growth many only be dragged down by a more abrupt end to inventory rebuilding and a larger negative contribution from external trade.”

Ben Bernanke, the chairman of the Federal Reserve, is to speak later today.

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