American growth forecast slashed

America’s rate of economic growth during the second quarter of the year has been revised down to 1.6%, according to the Bureau of Economic Analysis (BEA).

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

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

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. (article continues below)

Paul Ashworth, an economist at Capital Economics, said 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 said.

“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.