IBJNews

Economy grew at weak 1.3-percent rate in 2nd quarter

Associated Press
September 29, 2011
Back to TopCommentsE-mailPrintBookmark and Share

The U.S. economy grew slightly faster in the spring than previously estimated but remained dangerously weak in the face of high unemployment and higher gas prices. Many economists foresee slightly better growth in the current July-September quarter.

The annual growth rate was 1.3 percent in the April-June quarter, up from an estimate of 1 percent made a month ago, the Commerce Department said Thursday. The improvement reflected modestly more consumer spending and a bigger boost from trade.

Even with the upward revision, the economy grew at an annual rate of just 0.9 percent in the first six months of the year. That's the weakest six-month performance since the recession ended more than two years ago.

Though most economists don't expect another recession, they don't see growth accelerating enough to lower the unemployment rate, which was 9.1 percent in August. Many predict a rebound to growth of between 2 percent and 2.5 percent in the current quarter.

In a separate report, the government said the number of people seeking unemployment benefits fell sharply last week, an encouraging sign that layoffs are easing. The Labor Department said weekly applications dropped 37,000, to a seasonally adjusted 391,000.

That's the lowest level since April 2. And it's the first time that applications have fallen below 400,000 since Aug. 6.

A forecasting panel for the National Association for Business Economics predicts total growth for the year will be just 1.7 percent. In January, most economists had predicted 3-percent to 4-percent growth for the entire year. A Social Security tax cut gave Americans an extra $1,000 to $2,000 in after-tax income. That was expected to buoy consumer spending, which fuels 70 percent of growth.

But food and gas prices spiked, and those higher costs forced people to cut back on discretionary items, such as vacations, appliances and computers.

The 1.3-percent growth rate in the April-June period followed an even weaker 0.4 percent increase in the first three months of the year.

Economists expect consumer spending, which accounts for about 70 percent of economic activity, to strengthen slightly in the second half of this year. In part, that's because the supply of sought-after car models will be available again as U.S. automakers resume more normal production.

Data in the current quarter has shown some improvement. But analysts warn that growth is still so weak that another recession remains a risk.

One of the big worries is that a default by heavily indebted Greece could trigger a financial crisis similar to the upheavals that occurred after the Lehman Brothers failure in 2008. Such a shock could be enough to push not only the United States but the global economy back into recession.

In the April-June quarter, consumer spending grew at an anemic 0.7-percent rate, though that was better than an estimate a month ago that spending had risen only 0.4 percent.

Trade added more to growth than estimated a month ago because exports grew at a faster pace and imports didn't rise as rapidly. Exports add to U.S. growth, while imports subtract from it.

The NABE forecasting panel predicts overall growth of 2.1 percent in the July-September quarter and 2.3 percent in the October-December period. That pace is far below the levels needed to push the unemployment rate down significantly.

Facing decreased demand for their goods and services this year, businesses cut back on hiring. In August, the economy didn't add any jobs — the weakest month for hiring in nearly a year.

Beth Ann Bovino, chief economist at Standard & Poor's in New York, said the likely outlook is for the unemployment rate to remain around 9 percent through the rest of this year and the first part of 2012.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Of what value is selling alcoholic beverages to State Fair patrons when there are many families with children attending. Is this the message we want to give children attending and participating in the Fair, another venue with alooholic consumption onsite. Is this to promote beer and wine production in the state which are great for the breweries and wineries, but where does this end up 10-15 years from now, lots more drinkers for the alcoholic contents. If these drinks are so important, why not remove the alcohol content and the flavor and drink itself similar to soft drinks would be the novelty, not the alcoholic content and its affects on the drinker. There is no social or material benefit from drinking alcoholic beverages, mostly people want to get slightly or highly drunk.

  2. I did;nt know anyone in Indiana could count- WHY did they NOT SAY just HOW this would be enforced? Because it WON;T! NOW- with that said- BIG BROTHER is ALIVE in this Article-why take any comment if it won't appease YOU PEOPLE- that's NOT American- with EVERYTHING you indicated is NOT said-I can see WHY it say's o Comments- YOU are COMMIES- BIG BROTHER and most likely- voted for Obama!

  3. In Europe there are schools for hairdressing but you don't get a license afterwards but you are required to assist in turkey and Italy its 7 years in japan it's 10 years England 2 so these people who assist know how to do hair their not just anybody and if your an owner and you hire someone with no experience then ur an idiot I've known stylist from different countries with no license but they are professional clean and safe they have no license but they have experience a license doesn't mean anything look at all the bad hairdressers in the world that have fried peoples hair okay but they have a license doesn't make them a professional at their job I think they should get rid of it because stateboard robs stylist and owners and they fine you for the dumbest f***ing things oh ur license isn't displayed 100$ oh ur wearing open toe shoes fine, oh there's ONE HAIR IN UR BRUSH that's a fine it's like really? So I think they need to go or ease up on their regulations because their too strict

  4. Exciting times in Carmel.

  5. Twenty years ago when we moved to Indy I was a stay at home mom and knew not very many people.WIBC was my family and friends for the most part. It was informative, civil, and humerous with Dave the KING. Terri, Jeff, Stever, Big Joe, Matt, Pat and Crumie. I loved them all, and they seemed to love each other. I didn't mind Greg Garrison, but I was not a Rush fan. NOW I can't stand Chicks and all their giggly opinions. Tony Katz is to abrasive that early in the morning(or really any time). I will tune in on Saturday morning for the usual fun and priceless information from Pat and Crumie, mornings it will be 90.1

ADVERTISEMENT