WASHINGTON – The economy grew at a 2.9 percent annual rate in the spring -- better than first estimated but nowhere near the brisk pace logged in the winter, another sign of slowing business growth. Inflation marched higher.
The latest snapshot of economic activity, released by the Commerce Department Wednesday, showed that gross domestic product in the April-to-June quarter increased slightly more than the 2.5 percent pace first reported a month ago. That upgrade mostly reflected an improvement in the country's trade picture and stronger inventory building by businesses.
The upward revision, though, didn't change the big picture of the economy: In the spring, it slowed sharply from the first quarter's 5.6 percent pace, the strongest growth spurt in 2 1/2 years, as consumers and businesses tightened the belt.
Gross domestic product measures the value of all goods and services produced within the United States and is considered the best barometer of the country's economic standing.
The second-quarter's showing was slightly less than the 3 percent pace that analysts were expecting.
Even though the economy lost momentum in the spring compared with the winter, inflation moved higher.
An inflation gauge closely watched by the Federal Reserve showed that core prices -- excluding food and energy -- advanced at a rate of 2.8 percent in the second quarter, up from a 2.1 percent pace in the first quarter.
The second quarter's increase matched that seen in the first quarter of 2001 and hasn't been higher since the third quarter of 1994 when this inflation measure rose at a 3.2 percent pace.
With the economy slowing, the Federal Reserve earlier this month halted a rate-raising campaign that lasted for more than two years. The decision was a "close call" minutes of the meeting revealed.
The Fed meets next on Sept. 20 and there's uncertainty about its next move. Some economists believe rates will be left alone again, while others think a rate increase will be needed to keep inflation in check.
Fed policy-makers, concerned about inflation, are keeping the door open to a rate increase; but they are betting that inflation pressures will gradually lessen as economic growth moderates.
Oil prices, which hit a new record closing high of $77.03 a barrel in mid-July, have retreated and are hovering below $70 a barrel.
The average retail price of gasoline nationwide has fallen by nearly 20 cents over the past three weeks to $2.85 a gallon.