Growth in the U.S. slowed to a 2.4 percent annual rate in the second quarter, less than forecast, reflecting a larger trade deficit and an easing in consumer spending.
A slower pace of growth means employers may be reluctant to hire workers and more likely to keep a lid on prices in order to boost sales. Federal Reserve Chairman Ben S. Bernanke last week said the central bank is prepared to take further policy actions if the world’s largest economy “doesn’t continue to improve.”
“The economy entered the second quarter with plenty of momentum but exited with very little,” Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, said before the report. “We expect that growth in the third quarter will be slower.”
The worst U.S. recession since the 1930s was even deeper than previously estimated, reflecting bigger slumps in consumer spending and housing, according to the Commerce Department’s annual revisions also issued Friday.
The world’s largest economy shrank 4.1 percent from the fourth quarter of 2007 to the second quarter of 2009, compared with the 3.7 percent drop previously on the books, the report showed. Household spending fell 1.2 percent in 2009, twice as much as previously projected and the biggest decline since 1942.
Consumer spending, which accounts for about 70 percent of the economy, rose at a 1.6 percent pace last quarter, compared with a 1.9 percent rate the previous three months that was smaller than previously estimated, Friday’s report showed. Job gains have been slow to take hold, curbing household purchases.
The economy lost 8.4 million jobs during the recession that began in December 2007, the biggest employment slump in the post-World War II era. So far this year, company payrolls grew by 593,000 workers, according to Labor Department figures earlier this month.
More than 7 out of 10 Americans say the economy is still mired in recession, and the country is conflicted over how to balance concerns over joblessness and the federal budget deficit, according to a Bloomberg National Poll.
Just like the experts, Americans are torn about whether the federal government should focus on curbing spending or creating jobs, the poll conducted July 9-12 shows. Seven of 10 Americans say reducing unemployment is the priority. At the same time, the public is skeptical of the President Barack Obama’s stimulus program and wary of more spending, with more than half saying the deficit is “dangerously out of control.”
Obama is trying to garner support for his plan to provide $12 billion in tax breaks, ease terms for loans guaranteed by the Small Business Administration and create a $30 billion fund to help community banks offer loans to small businesses.
The trade gap in the second quarter widened to $425.9 billion from $338.4 billion, subtracting 2.8 percentage points from growth, the biggest reduction since 1982, today’s report showed. Imports grew at a 29 percent pace, while exports climbed 10 percent.
