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Spring economic growth of 2.5% fans fears

| Friday, Sept. 27, 2013, 12:01 a.m.

WASHINGTON — The economy grew at a 2.5 percent annual rate from April through June, an improvement from the first three months of the year. But economists are worried that growth may now be slowing.

The Commerce Department said on Thursday that its final look at economic growth in the spring was unchanged from a prior estimate made last month.

However, the components of growth were altered slightly.

Businesses added a bit less to their stockpiles, and exports did not grow as fast as previously thought. These downward revisions were balanced by slightly stronger spending by state and local governments.

Many analysts believe growth is slowing to a sluggish rate at or below 2 percent in the current quarter. Economists initially had hoped growth would improve in the second half of the year.

If economists are correct that economic activity slowed this summer, it would mark the third quarter in the past four that growth rates have been 2 percent or lower. Growth in the fourth quarter of 2012 nearly stalled out at a barely discernible 0.1 percent rate and then improved slightly to 1.1 percent growth in the January-March quarter.

The government initially estimated activity in the April-June quarter at a lackluster 1.7 percent, but a big narrowing of the trade deficit reflecting stronger export sales overseas helped boost growth to 2.5 percent in the government's second look.

The 2.5 percent figure held steady in the government's third and final look at the gross domestic product for the spring quarter. The GDP is the economy's total output of goods and services.

Economists had thought that growth would accelerate in the second half of the year behind steady hiring and fading impact from government spending cuts and higher taxes.

But early activity for the quarter has been discouraging. Consumers spent more cautiously in July as their income barely increased. The government spending cuts have weighed on defense spending and business investment. And higher mortgage rates threaten to slow a housing recovery that had been a solid contributor to growth in the first half of the year.

Even the job gains from earlier in the year appear to be slowing. Employers have added an average of just 155,000 jobs a month since April, down from an average of 205,000 for the first four months of the year.

Some economists worry that growth remains too weak to accelerate hiring, boost pay and encourage Americans to spend more.

Analysts are still hopeful that growth will pick up in 2014. In its revised forecast, the Federal Reserve last week projected that the economy would grow roughly 3 percent next year, up from about 2 percent to 2.3 percent this year.

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