US economy slows sharply in H1

WASHINGTON — The US economy expanded at meagre 1.3 per cent annual rate in the spring after scarcely growing at all in the first three months of the year, the Commerce Department said on Friday.

By (AP)

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Published: Sat 30 Jul 2011, 11:10 PM

Last updated: Tue 7 Apr 2015, 4:40 AM

The combined growth for the first six months of the year was the weakest since the recession ended two years ago. The government revised the January-March figures to show just 0.4 per cent growth — down sharply from its previous estimate of 1.9 per cent.

High gas prices and scant income gains have forced Americans to pull back sharply on spending in the spring. Consumer spending only increased 0.1 per cent this spring, the smallest gain in two years. Government spending fell for the third straight quarter.

Stocks dropped in morning trading. The Dow Jones industrial average fell 100 points, and broader indexes also declined. “These numbers are extremely bad,” said Nigel Gault, an economist at IHS Global Insight.

The sharp slowdown means the economy will likely grow this year at a weaker pace than last year. Economists don’t expect growth to pick up enough in the second half of the year to lower the unemployment rate, which rose to 9.2 per cent last month.

The weaker data will also add pressure to already-tense negotiations between President Barack Obama and lawmakers over increasing the debt limit. Any deal will likely include deep cuts in government spending. That could slow growth further in the short term.

But if Congress fails to raise the debt limit and the government defaults, financial markets could fall and interest rates could rise. Earlier this year, economists thought that a Social Security payroll tax cut would accelerate growth in 2011. But most of that money has gone to pay for higher gas prices.

Consumer spending on long-lasting manufactured goods, such as cars and appliances, fell 4.4 per cent. Many auto dealers reported shortages of popular models after Japan’s March 11 earthquake, cutting into auto sales.

Employers have pulled back on hiring after seeing less spending by consumers. The economy added just 18,000 net jobs in June, the fewest in nine months and a steep drop from the average of 215,000 jobs per month added from February through April.



More news from