More depressing Obama economic news...
U.S. Economy Slowed to a Tepid 1.5% Rate of Growth
By SHAILA DEWAN
July 27, 2012
The United States economy grew by a tepid 1.5 percent annual rate in the second quarter, losing the momentum it had appeared to be gaining earlier this year, the government reported Friday.
Growth was curbed as consumers limited new spending and as business investment slowed in the face of a global slowdown and a stronger dollar. Several bright spots in the first quarter, including auto production, computer sales, housing and large purchases like appliances and televisions, dimmed or faded away altogether in the second quarter.
The sluggishness of the recovery makes the United States more vulnerable to trouble in Europe and increases the likelihood of more stimulus from the Federal Reserve, which has lowered its forecasts in recent weeks.
It also illustrates the election-season challenge to President Obama, who must sell his economic record to voters as the recovery slows.
The lackluster showing of the gross domestic product immediately gave Mr. Obama’s opponents the opportunity to question the federal government’s response to the financial crisis, though the vast majority of economists agree that the stimulus and the bank bailouts saved jobs. The G.D.P. report, released Friday by the Commerce Department, also spurred calls from liberals for the government to do more.
In part, the weakening was to be expected after an unseasonably warm spurt during the winter, and in part it followed the pattern of the last couple of years — one of hopes raised, then dashed. While the economy has not entered a downward spiral in which weakness feeds on itself, wrote Jim O’Sullivan, the chief United States economist for High Frequency Economics, an analysis firm, “There does not appear to be much basis for expecting a significant pickup any time soon.”
In the first quarter, the economy grew by a 2 percent annual rate, according to the revised figures. The previous estimate was 1.9 percent.
A slowdown in household spending was the primary damper on growth, as consumers increased their savings rate, a sign of increased uncertainty about the future. State and local governments also cut spending. Exports continued to accelerate in the second quarter despite more recent signs of diminishing demand.
The pace of the recovery may show that economic rebounds following financial busts simply take their own excruciating time.
“You can’t blame all of it on Europe — we have our own problems yet,” said Joshua Shapiro, the chief United States economist at MFR Inc., a financial consulting firm. “When you have a credit bubble or asset bubble that’s popped, the recovery process from that is just really long and really painful.”
Inflation, a measure watched closely by the Federal Reserve as it determines whether to take further action, slowed as well, with consumer prices growing only 0.7 percent compared with 2.5 percent in the first quarter.
The Commerce Department also released updated estimates of economic activity for 2009, 2010 and 2011. Those figures showed that the recession was less deep than it seemed in the most recent reports — though more pronounced than in initial readings — and, as a consequence, that the pace of recovery also appears somewhat slower.
The new estimates show that economic activity fell by 3.1 percent in 2009 and then rose by 2.4 percent in 2010. Last summer, the government reported that activity fell by 3.5 percent in 2009 before rising 3 percent in 2010. The estimated pace of growth in 2011, 1.8 percent, remained basically unchanged. It was previously reported as 1.7 percent.
The revisions, part of an annual process, reflect the imprecise nature of the agency’s work. Its initial estimates are derived from a mix of comprehensive data, samples and educated guesswork, and refined over time. In this case, officials said they had significantly underestimated spending by state and local governments in 2009, and overestimated corporate profits and purchases in 2010.
The agency now estimates average annual growth of 0.3 percent over the three-year period, rather than 0.4 percent.
But the new numbers may modify public perception of two key economic trends. It appears that corporations rebounded more slowly from the recession than previously believed. And the more complete data used in the new estimates show state and local governments increased spending in 2009 before cutting back in the next two years. Officials said they did not have enough information to explain the previously unreported increase, except to say the money was not spent on personnel or on infrastructure projects, the two categories that might have benefited most directly from the federal government’s stimulus programs.