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WASHINGTON: The United States’ economic recovery lost momentum in the spring as growth slowed to a 2.4 per cent pace, its most sluggish showing in nearly a year and too weak to drive down unemployment.
Consumers spent less, companies slowed their restocking of shelves and the nation’s trade deficit dragged more on the economy in the April-to-June quarter. In a separate report, the Commerce Department said the recession was deeper than previously estimated.
Together, the reports raise doubts about whether employers will hire enough and consumers will spend enough to invigorate the economy. As unemployment remains near double digits, Congress could feel pressure to pass more stimulus measures to speed the recovery. So far, Republicans and some Democrats have blocked additional spending because of their concerns about the size of the deficit.
Investors reacted to the report with disappointment. Stock futures fell in the hour before the markets opened. The Commerce Department’s report released on Friday also showed that the economy grew at a 3.7 per cent pace in the first three months of this year. That was much better than the 2.7 per cent pace estimated just a month ago.
Still, the recovery has been losing power for two straight quarters. That raises concerns about whether it will fizzle out. Or worse, tip back into a “double-dip” recession.
The US economy began to grow in the third quarter of last year after having suffered the worst recession since the Great Depression. And in the following quarter the economy’s growth surged at a 5 per cent pace, the high water mark of the rebound.
Spending
Consumer spending, usually the lifeblood of economic activity, slowed in the second quarter. Such spending rose at an anemic 1.6 per cent pace. That was down from a 1.9 per cent pace in the first quarter and was the weakest showing since the end of last year.
Instead, Americans saved more. They saved 6.2 per cent of their disposable income in the second quarter, the highest share in a year.
The 2.4 per cent growth rate logged in the April-to-June quarter was slightly less than the 2.5 per cent pace economists were forecasting. It was the weakest since a 1.6 per cent pace in the third quarter of last year, when a record streak of four straight losing quarters came to an end.
Growth
“The economy is growing but not enough to make most Americans happy. At this weak pace, it will take more time than many hoped for people to really feel the benefits of this upturn,” said Joel Naroff, president of Naroff Economic Advisors.
Associated Press
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