Recession now a risk for feeble US economy
Source: Agencies |
July 31, 2011, Sunday
|
Print Edition
Print Edition
THE United States' economy is at risk of slipping into another recession.
It nearly stalled in the first six months of the year, the government reported on Friday. Growth was feeble in the second quarter and almost non-existent in the first.
The new picture of an economy far weaker than expected made a second recession a more serious threat, and the threat will rise if Congress can't reach a deal to raise the government's debt limit.
"The only question now is, how much weaker could things get?" said Nariman Behravesh, chief economist at IHS Global Insight.
In April, May and June, the economy grew at a 1.3 percent annual rate, below expectations. And the government changed its growth figure for January, February and March to 0.4 percent, far below the previous estimate of 1.9 percent.
Combined, the first half of the year amounts to the worst six-month performance since the Great Recession officially ended in June 2009.
In the past year, the gross domestic product - the output of goods and services - recorded growth of 1.6 percent.
Since 1950, year-to-year growth has dipped below 2 percent 12 times. Ten of those times, the economy was already in recession or soon fell into one, said Mark Vitner, senior economist at Wells Fargo Securities.
Normal economic growth is closer to 3 percent.
High gasoline prices, manufacturing disruptions from the Japan earthquake and cuts in state and local government have weighed down the economy.
Add to those problems the uncertainty fanned by the political stalemate in Washington, with Republicans refusing to raise the federal government's US$14.3 trillion borrowing limit unless Democrats agree to deep federal spending cuts.
Without an agreement, the Treasury Department said, the government won't have enough money to pay all its bills after Tuesday. It will have to cut spending by 40 percent.
Joel Naroff of Naroff Economic Advisors said cuts would lead to recession. "You kick the government and the economy is doubled over in pain," he said.
It nearly stalled in the first six months of the year, the government reported on Friday. Growth was feeble in the second quarter and almost non-existent in the first.
The new picture of an economy far weaker than expected made a second recession a more serious threat, and the threat will rise if Congress can't reach a deal to raise the government's debt limit.
"The only question now is, how much weaker could things get?" said Nariman Behravesh, chief economist at IHS Global Insight.
In April, May and June, the economy grew at a 1.3 percent annual rate, below expectations. And the government changed its growth figure for January, February and March to 0.4 percent, far below the previous estimate of 1.9 percent.
Combined, the first half of the year amounts to the worst six-month performance since the Great Recession officially ended in June 2009.
In the past year, the gross domestic product - the output of goods and services - recorded growth of 1.6 percent.
Since 1950, year-to-year growth has dipped below 2 percent 12 times. Ten of those times, the economy was already in recession or soon fell into one, said Mark Vitner, senior economist at Wells Fargo Securities.
Normal economic growth is closer to 3 percent.
High gasoline prices, manufacturing disruptions from the Japan earthquake and cuts in state and local government have weighed down the economy.
Add to those problems the uncertainty fanned by the political stalemate in Washington, with Republicans refusing to raise the federal government's US$14.3 trillion borrowing limit unless Democrats agree to deep federal spending cuts.
Without an agreement, the Treasury Department said, the government won't have enough money to pay all its bills after Tuesday. It will have to cut spending by 40 percent.
Joel Naroff of Naroff Economic Advisors said cuts would lead to recession. "You kick the government and the economy is doubled over in pain," he said.
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