Wednesday, Jun 20, 2018
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Economists in poll expect slowest GDP gain in year

WASHINGTON -- The U.S. economy likely grew at its slowest pace in a year in the second quarter as demand for automobiles waned, according to a Reuters poll.

Such a development could push the Federal Reserve closer to easing monetary policy further to spur the recovery.

According to the poll, gross domestic product likely grew at a 1.5 percent annual rate in the second quarter. That would be the slowest pace since the second quarter of 2011. The economy grew at a 1.9 percent rate in the first three months of 2012.

Economists said that while officials at the Fed were already anticipating a soft second-quarter GDP reading, details of the report -- when combined with weak numbers so far in the third quarter -- will urge further policy action from the U.S. central bank.

The Commerce Department will release its report, the first snapshot of second-quarter GDP, on Friday.

Fed policy makers will parse data at their two-day meeting next week. Economists do not expect the Fed -- which last month extended a program to move bonds it already holds toward longer maturities to hold down borrowing costs -- to announce new policy measures then.

Economist Jeremy Lawson of BNP Paribas said, "As they look at the data, not just in the second quarter, but the early indicators for the third quarter, they should be able to see that a rebound in growth doesn't seem likely in the near term without further policy support."

Many believe in September the Fed will declare a third round of bond purchases, also known as quantitative easing. "The closer you get to 1 [percent growth pace], the more you start to ask yourself, are we stagnating, could the economy stall?" said Robert DiClemente, chief U.S. economist at Citigroup in New York. "I think we will most likely muddle through, but it will probably take some further action from the Fed at some point."

The GDP report may confirm factors such as a warm winter that supported growth in the first quarterwere of a temporary nature.

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