Forex News – U.S. economy grows less than expected

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The U.S. released advanced GDP data today which is the broadest measure of economic activity and the primary gauge of the economy’s health.

Data showed that the U.S. economy grew less than economist expectations in the second quarter, recording a 1.3 percent annual rate following a 0.4 percent gain in the prior quarter. The forecast was for a 1.8 percent increase.

The data indicate the consumers have pulled back from spending due to slower job growth and slow income gains. Higher expenses for necessities like food and energy may have curtailed spending on less essential items.

The picture of the rest of 2011 does not look good since U.S. Congress is currently negotiating budget cuts to help reduce the deficit.

“The economy is stuck in a very slow-growth scenario,” said Julia Coronado, chief economist for North America, BNP Paribas in New York. “Consumers are still very cautious and vulnerable. This is a very challenging report for policy makers.”

Meanwhile, the U.S. government’s inability to agree on a budget and debt-limit increase may be making companies reluctant to order new equipment or hire new employees.

As the world’s largest economy slows, so does the Dollar, which fell across the board following the news, reaching record lows against the Swiss Franc, and four-month lows against the Yen.