US economy stalls as growth is revised down to 1.6%

The US economy grew at a much slower pace than previously thought over the spring, mostly because of the largest surge in imports in 26 years.

The commerce department said the country's gross domestic product - the broadest measure of the economy's output - grew at a 1.6% annual rate between April and June, down from an initial estimate of 2.4% last month and well below the first quarter's 3.7% pace. Many economists had expected a sharper drop.

Federal Reserve chairman Ben Bernanke raised the prospect of another large-scale securities purchase, but stopped short of committing to any specific action. Policymakers were meeting today to ponder the economy's direction and hear from Bernanke.

GDP has gone up for four straight quarters but that growth has averaged only 2.9%, a weak pace after such a steep recession. The economy needs to grow at about 3% just to keep the 9.5% unemployment rate from rising.

In remarks prepared for delivery to the conference, Bernanke raised the prospect of another Fed purchase of securities, most likely government debt or mortgage securities, to drive down rates on mortgages and other debt to spur more spending by Americans.

Bernanke described the economic outlook as "inherently uncertain" and said the economy "remains vulnerable to unexpected developments".

The revised GDP data is likely to fuel analysts' concerns that the economy is at growing risk of slipping back into recession.

Ryan Wang, of HSBC Securities in New York, said: "I think people will decide these numbers will confirm the economy is slowing sharply. You combine these with any other numbers we've got from the third quarter and there's little reason to think the (next) quarter is going to be better."

Nigel Gault, chief US economist at IHS Global Insight, added: "Bernanke can't announce a Marshall Plan to deal with mortgage foreclosures or small business lending, but the markets are acting as if they think he can.

"Bernanke could say the President has asked him to help out with a Marshall Plan for the mortgage situation, but he can't take the first step, at least in public."