U.S. economy misses mark in 2Q, expands at 1.3%

The U.S. economy grew at a sluggish 1.3% annual rate in the April-June quarter, held back by the severe drought that reduced farm production in the Midwest. The growth rate was lowered from a previous estimate of 1.7%, the Commerce Department reports this morning. About half of the downward revision to growth came from a decline in farm production. The estimate for crop production was slashed by $12 billion. But economic growth was also weakened by slow growth in consumer spending and exports. Economists say the Midwest drought would likely prove to be a drag on growth in the July-September quarter. But Paul Ashworth, chief U.S. economist at Capital Economics, says once the drought eases and crop yields rebound to normal levels, the farm sector will provide a boost to economic growth. Growth slowed from the 2% rate in the January-March and isn’t expected to exceed that level for the rest of the year. Growth at or below 2% is typically too slow to lower unemployment, which was 8.1% in August. Most economists expect unemployment will stay around 8% for the rest of this year.