IBJNews

Economy growing at slowest pace since recession

Back to TopCommentsE-mailPrintBookmark and Share

The economy expanded at meager 1.3-percent annual rate in the spring after scarcely growing at all in the first three months of the year, the Commerce Department said Friday.

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-percent growth — down sharply from its previous estimate of 1.9 percent.

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 percent 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 momentum in the economy is clearly very weak."

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 percent 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.

"It is hard to see the economy getting much stronger," Paul Dales, an economist at Capital Economics, said in a research note. "In fact, if the debt ceiling is not raised ... we could well have another recession on our hands."

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 percent. 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.

Those who have jobs are seeing little gain in their incomes. After-tax incomes, adjusted for inflation, rose only 0.7 percent, matching the previous quarter and the weakest since the recession ended.

The drop in government spending was driven by cuts at the state and local level. Those governments have slashed spending in seven of the eight quarters since the official end of the recession.

Business investment, which has been a driver of growth during the recovery, also faltered this spring. Spending on equipment and software grew 5.7 percent in the second quarter, down from the first quarter's 8.7 percent pace and below the double-digit gains posted last year.

The government also revised data going back to 2003. The data show the recession was even worse than previously thought. The economy shrank 5.1 percent during the recession, which lasted from December 2007 through June 2009, compared to the earlier estimate of 4.1 percent. Both figures represent the worst downturn since World War II.

"The depth of the recession is now clearly so much deeper," Gault said.

Friday's report is the first of three estimates the government releases of the gross domestic product, which measures everything from restaurant meals to auto production to government spending.

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. I keep wondering why I keep hearing about this problem of corporations leaving America, and I never hear a reasonable proposal to lower corporate tax rates and raise personal rates on income from capital gains and dividends, especially for high earners. It is just too simple of a solution for Congress to embrace?

  2. Are you financially down and you need money to settle your dept,or you need money to start up a business or to invest on a huge business,we also offer Loans to individuals, Firms and cooperate bodies at low interest rate , loan terms determinant,Loan amount between the sum of $5,000.00 to $100,000,000.00. US Dollars And Euro. Loan for developing businesses a competitive edge/ business expansion. We Offer The Following Kinds Of Loans. Personal Loans (Secure and Unsecured) Business Loans (Secure and Unsecured) Consolidation Loan FIRST INFORMATIONS NEEDED ARE: BORROWER’S DATA’S INFORMATION,FILL AND RETURN FOR QUICK START UP PROCESS. Name:_________ Last Name:_________ Age:_________ Contact Address:_________ Country:_________ Amount Needed as Loan:_________ Loan Duration:_________ Phone Number__________ Monthly Income/Yearly Income:_________ Purpose for Loan:_________ Occupation:_________ How Soon is Loan Needed__________ Email via: albertbrownfirm@outlook.com

  3. is a disaster. SR37 already needs to be built to interstate standards between 465 and SR144. Southport Road is a mess each morning and evening.

  4. Bass Pro Shops would be good for the mall as well as a Giant Eagle Market District or a Jungle Jim's International Market Place grocery store like the one near Cincinnati Ohio.A Disney quest indoor theme park would be good.An Academy outdoor store would be good too.Indoor Circus shows and magic shows would be good as well. A casino with sports bar would be good.A Disney theater inside that shows movies and Broadway shows would work.Nashville Tennessee concert shops with indoor neon lights would be good.How about a theater that shows travel shows and theme parks. A train store would be good.How about a giant toy store with high tech video games.

  5. This development is in addition to Allpoints Midwest 5, Aitrtek, a recent FedEx and more in Plainfield. Greenwood and Brownsburg also have similar projects.

ADVERTISEMENT