US economic growth slowed more sharply in the second quarter than first thought as oil prices rose and the trade gap swelled, the government said on Friday in a report that confirmed momentum faltered in the spring.
US gross domestic product - which measures total output within the nation's borders - expanded at a 2.8 per cent annual rate in the second quarter to $10.8 trillion, down from the 3 per cent pace estimated last month by the Commerce Department.
The downward revision marked a sharp slowdown from the first quarter's 4.5 per cent expansion, but was widely expected by Wall Street and markets had little reaction.
While there are signs the economy picked up strength in the summer, analysts said growth is unlikely to bounce back quickly enough in the third quarter to spur job creation.
The uneven expansion since the 2001 recession and poor job growth in recent months has sparked criticism from Democratic presidential candidate Senator John Kerry, who said President George W. Bush's economic stewardship has failed.
"These GDP numbers are the latest piece of evidence that George Bush is misleading Americans when he says that the economy has turned the corner," the Kerry campaign said in a statement.
A separate report showed US consumer sentiment picked up more than expected in late August as oil prices eased from record highs and security fears abated.
The University of Michigan's index of consumer sentiment rose to 95.9 in late August from 94.0 earlier in the month, but it was down slightly from 96.7 at the end of July, according to market sources who saw the subscription-only report.
Confidence took a knock early in the month as oil prices spiked to new highs and consumers expressed concern about the prospects for the US economy. But with crude oil prices heading lower, analysts had expected some of this pessimism to evaporate, especially as consumers were expressing more confidence in the improvement of the labor market.
The Commerce Department said the downgrade to the GDP estimate was caused by an upward revision to imports - which detract from growth - and a downward revision to exports.
The change had been widely anticipated by analysts after a dramatic deterioration of the US trade position in June. The trade gap soared to a record $55.8 billion in the month, far higher than had been assumed in the first estimate of second-quarter GDP.
Investment in inventories as well as in equipment and software also received an upward boost, while consumer spending was bumped up to a 1.6 per cent gain, well above the 1 per cent rise seen last month.