Figures this afternoon show that US economic growth slowed abruptly during the second quarter of this year while a key measure of inflation accelerated.
The Commerce Department said gross domestic product grew at an annual rate of 2.5% in the April-June quarter, well below Wall Street analysts' forecasts for 3% and less than half the 5.6% rate registered in the first quarter.
Slower consumer spending, especially on costly durable goods like new cars, was a key reason for slower expansion.
At the same time, an inflation gauge favoured by the Federal Reserve - a measure of personal consumption expenditure prices minus food and energy - jumped at a 2.9% rate in the second quarter, well ahead of the first quarter's 2.1%.
Department officials said it was the fastest rate of increase for this figure in nearly a dozen years, since the third quarter of 1994.
The economy had been widely expected to slow after a sizzling first quarter, in part because a cooling housing market coupled with soaring petrol prices was expected to affect consumer spending.
A breakdown showed that consumer spending, which fuels about two-thirds of US economic activity, increased at a 2.5% annual rate in Q2, sharply below the first quarter's 4.8%. Business investment slowed to a 2.7% rate of increase, a fraction of the first quarter's 13.7%.
Business spending on new computers and software, after soaring at a 15.6% rate in the first quarter, shrank by 1% in the second quarter, the first fall in this category of spending since the start of 2003.
Investment in residential construction shrank for a third successive quarter, declining at a 6.3% rate after falling 0.3% in the first quarter.
