The Commerce Department’s third estimate of gross domestic product growth was well below expectations that it would be unchanged from the prior estimate of 1.7 percent.
The second-quarter GDP number marked the slowest growth since the first quarter of 2011, and followed a 2.0 percent annual pace in the first quarter.
“The slowing came primarily from a decline in durable goods consumption and fixed investment,” said Scott Hoyt at Moody’s Analytics, calling the GDP growth “disappointing.”
The loss of momentum in the world’s largest economy going into the third quarter has spurred new Federal Reserve stimulus.
In mid-September, the Fed lowered its GDP growth forecast for this year to 1.7-2.0 percent, from a previous estimate of 1.9-2.0 percent.
The dimmer outlook came as the central bank announced a new $40 billion a month bond-buying program aimed at lowering long-term interest rates to help growth and boost employment.
Hoyt said the lackluster growth means unemployment would remain stuck above 8.0 percent, where it has been since last October, for some time.
“Businesses are reluctant to hire because of the threats posed by the approaching fiscal cliff in Washington, concerns about a potential breakup of the eurozone, and high energy prices,” he said.