US economy crawls to 1.7% growth in Q2

WASHINGTON — The US economy grew at a tepid 1.7 per cent annual rate in the April-June quarter, suggesting growth will stay weak in the second half of the year.

By (AP)

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Published: Thu 30 Aug 2012, 11:08 PM

Last updated: Tue 7 Apr 2015, 11:48 AM

Slightly stronger consumer spending and greater exports were the main reasons the Commerce Department reported on Wednesday that growth was better than its initial estimate of 1.5 per cent. Still, growth has slowed from the two per cent annual rate in the January-March quarter and the 4.1 per cent rate in the fourth quarter of 2011. A weak economy and high unemployment could hurt President Barack Obama re-election chances in November and bolster Republican challenger Mitt Romney’s campaign. Republicans are in Tampa, Florida, this week to formally nominate Romney and have pointed to the dismal growth in making the case to elect their candidate.

Economists expect only modest improvement in the second half of the year. Most believe the economy will keep growing, but at a subpar rate of around two per cent.

“The economy was sluggish in the second quarter and the slight upward revision ... does nothing to change that picture,” said John Ryding, an economist at RDQ Economics, in a note to clients.

The report was the government’s second look at gross domestic product for the second quarter. GDP measures the country’s total output of goods and services, from the purchase of restaurant meals to construction of highways and bridges. A third and final estimate of second-quarter growth will be released next month.

Growth at or below two per cent is not enough to lower the unemployment rate, which was 8.3 per cent in July. Most expect the unemployment rate to stay above eight per cent for the rest of this year.

A majority of Americans disapproves of how Obama is handling the economy, according to recent polls, which show that Romney has exploited those concerns and moved into a virtual tie in the race.

Government spending, which has been a drag on growth for the past two years, contracted again in the second quarter. But the decline at an annual rate of 0.9 per cent was less than the initial estimated drop of 1.4 per cent. — AP

That reflected a much smaller dip in defense spending than first estimated.

All of the changes boosted economic output by $6.5 billion more than previously estimated, leaving total GDP at $13.56 trillion, after adjusting for inflation, in the second quarter.

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