US economic growth slows

US
economic growth slowed between April and June, with GDP growing by an
annualised rate of 2.4 per cent, the US Commerce Department has said.

This
compares with an annual rate of 3.7 percent in the previous quarter.

The
second quarter figure is a first estimate, and could be revised either up or
down in the coming months.

There
are growing fears about the strength of the US economic recovery, particularly
concerning the country’s high unemployment rate of 9.5%.

Despite
the slower rate of growth, economic adviser to the White House Christine Romer
said: “This solid rate of growth indicates that the process of steady
recovery from the recession continues.

“Nevertheless,
faster growth is needed to bring about substantial reductions in
unemployment.”

About
200 people come through the doors of Philadelphia’s City Hall every day and
Judge Annette Rizzo says it is like a petri dish where the development of the
city’s economy can be examined in minute detail”

A
large increase in imports and a fall in sales of goods such as cars partly
explain the slowdown in GDP growth, while personal consumption grew at a slower
rate than in the first quarter.

These
factors more than offset an increase in spending on property construction, as
Americans looked to take advantage of tax credits for home buyers that expired
during the quarter.

The
Commerce Department also revised its previous estimate for growth in the first
three months of the year up sharply, from 2.7 per cent  to 3.7 per cent.

“The
economy entered the second quarter with plenty of momentum, but exited with
very little,” said Nigel Gault, chief US economist at IHS Global Insight.

The
US economy has now grown for four straight quarters.

‘Weakening environment’

The
second quarter GDP growth figure was slightly lower than analysts’
expectations.

As
a result, the main Dow Jones index fell more than 100 points in early trading,
before swiftly recovering to 10,427.57, 40 points down on the day.

“This
number will cast a pall on today’s trading,” said Jack Ablin at Harris Private
Bank.

He
also expressed commonly-held fears that growth could slow further as government
stimulus measures are withdrawn.

“My
sense is that we’re operating in a weakening environment without the help of a
lot of stimulus. If the stimulus package was a box of doughnuts dumped on the
economy, we only have one or two doughnuts left in the box.”

The
US pumped hundreds of billions of dollars into the economy during the downturn
to try to stimulate demand.

Earlier
on Friday, the International Monetary Fund (IMF) said that the US might have to
increase its stimulus spending to support the recovery.

It
said the US “economic recovery has been slow by historical standards”
and warned that “the outlook remains uncertain”.

“Thanks
to a massive policy response to the worst financial crisis since the Great
Depression, the US economy is recovering, but further decisive policy action
will be needed to address the policy challenges stemming from the crisis,”
the IMF warned.

0
0

NO COMMENTS