Blow for Obama as new figures show US economy slowing even further as Americans cut back on spending

http://www.dailymail.co.uk/news/article-2179872/GDP-figures-Blow-Obama-U-S-economy-slowing-further.html

By Associated Press

PUBLISHED: 09:50 EST, 27 July 2012 | UPDATED: 09:51 EST, 27 July 2012

President Obama has been dealt a devastating blow today as new figures reveal the U.S economy is slowing even further – growing at a rate of just 1.5 per cent in the last quarter.

The slow rate, between April and June, comes after Americans cut back sharply on spending and adds to worries that the economy could be stalling three years after the recession ended.

It is significantly down from the 2 per cent rate between January and March.

Growth at or below 2 percent isn’t enough to lower the unemployment rate, which was 8.2 percent last month – and most economists don’t expect growth to pick up much in the second half of the year.

Concern: President Obama's economic policy has taken yet another knock as new figures show the US economy has slowed even further - down to 1.5 per cent growth from 2 per cent earlier this yearConcern: President Obama’s economic policy has taken yet another knock as new figures show the US economy has slowed even further – down to 1.5 per cent growth from 2 per cent earlier this year

Europe’s financial crisis and a looming budget crisis in the U.S. are expected to slow business investment further

Stock futures rose slightly after the report was released. Some economists had thought the growth estimate would be even lower.

‘The main take away from today’s report, the specifics aside, is that the U.S. economy is barely growing,’ said Dan Greenhaus, chief economic strategist at BTIG LLC.

‘Along with a reduction in the actual amount of money companies were able to make, it’s no wonder the unemployment rate cannot move lower.’

The lackluster economy is raising pressure on President Barack Obama in his re-election fight with Mitt Romney, the presumptive Republican presidential nominee.

But few think the Fed, the White House or Congress can or will do anything soon that might rejuvenate the economy quickly. Many lawmakers, for example, refuse to increase federal spending in light of historically large budget deficits.

Holding back: Consumers spent at their slowest pace in a year, increasing pressure on policymakersHolding back: Consumers spent at their slowest pace in a year, increasing pressure on policymakers

The 1.5 percent growth rate in the second quarter was the weakest since the economy, as measured by the gross domestic product, expanded at a 1.3 percent rate in the July-September quarter last year. GDP measures the country’s total output of goods and services, from the purchase of a cup of coffee to the sale of fighter jets.

Current-dollar GDP increased at an annual rate of $117.6 billion in the second quarter to $15.6 trillion.

‘The U.S. economy is barely growing. It’s no wonder the unemployment rate cannot move lower’

Dan Greenhaus, economic strategist

Growth was weaker mostly because consumer spending slowed to a growth rate of just 1.5 percent. That’s down from 2.4 percent in the first quarter. Americans bought fewer autos, computers and other long-lasting manufactured goods. Spending on services increased.

They also saved more. The savings rate increased to 4 percent, up from 3.6 percent in the first quarter.

Consumer spending, which accounts for 70 percent of economic activity, was offset somewhat by a slightly smaller drag from the government. Spending by governments fell at an annual rate of 1.4 percent in the second quarter, just half of the 3 percent rate of decline in the first quarter.

The Commerce Department also revised its growth estimates for the past three years. Those revisions showed that the economy contracted 3.1 percent in 2009, slightly less than the 3.5 percent previously reported.

Finding work: A construction worker walks past a block of new homes under construction in Alhambra, California. The Federal Reserve noted employment levels are improving at only a 'tepid pace'Finding work: A construction worker walks past a block of new homes under construction in Alhambra, California. The Federal Reserve noted employment levels are improving at only a ‘tepid pace’

Growth in 2010 was put at 2.4 percent, down from 3 percent, with growth in 2011 at 1.8 percent instead of 1.7 percent.

The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009.

Until a few weeks ago, many economists had been predicting that growth would accelerate in the final six months of the year. They pointed to gains in manufacturing, home and auto sales and lower gas prices.

But threats to the U.S. economy have left consumers too anxious to spend freely. Jobs are tight. Pay isn’t keeping up with inflation. Retail sales fell in June for a third straight month. Manufacturing has weakened in most areas of the country.

Fear is also growing that the economy will fall off a “fiscal cliff” at year’s end. That’s when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement.
All that is making companies reluctant to expand and hire much.
Read more: http://www.dailymail.co.uk/news/article-2179872/GDP-figures-Blow-Obama-U-S-economy-slowing-further.html#ixzz21q5x6wdK

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Posted on July 27, 2012, in Economy / Finance, Politics, US Politics and tagged , , , , . Bookmark the permalink. Leave a comment.

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