US recovery dragging its feet
By Jeannine Aversa |
July 31, 2010, Saturday
|
Print Edition
Print Edition
THE United States' economic recovery lost momentum in the spring as growth slowed to a 2.4 percent 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 US Commerce Department said the recession was deeper than previously estimated.
Together, the reports raise doubts about whether employers will hire enough people and consumers will spend enough money 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.
The Commerce Department's report released yesterday also showed that the economy grew at a 3.7 percent pace in the first three months of this year, better than the 2.7 percent 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 percent pace, the high water mark of the rebound.
Much of the expansion was driven by the government's massive US$862 billion stimulus package of tax cuts and increased spending. Also, companies helped energize growth with a burst of spending to replenish inventories that were cut down during the recession.
Now, as those forces are fading, concern is growing as to whether the private sector can boost spending and investment enough to keep the recovery afloat.
Consumer spending, usually the lifeblood of economic activity, slowed in the second quarter. Such spending rose at an anemic 1.6 percent pace. That was down from a 1.9 percent pace in the first quarter and was the weakest showing since the end of last year.
Instead, Americans saved more. They saved 6.2 percent of their disposable income in the second quarter, the highest share in a year.
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 US Commerce Department said the recession was deeper than previously estimated.
Together, the reports raise doubts about whether employers will hire enough people and consumers will spend enough money 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.
The Commerce Department's report released yesterday also showed that the economy grew at a 3.7 percent pace in the first three months of this year, better than the 2.7 percent 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 percent pace, the high water mark of the rebound.
Much of the expansion was driven by the government's massive US$862 billion stimulus package of tax cuts and increased spending. Also, companies helped energize growth with a burst of spending to replenish inventories that were cut down during the recession.
Now, as those forces are fading, concern is growing as to whether the private sector can boost spending and investment enough to keep the recovery afloat.
Consumer spending, usually the lifeblood of economic activity, slowed in the second quarter. Such spending rose at an anemic 1.6 percent pace. That was down from a 1.9 percent pace in the first quarter and was the weakest showing since the end of last year.
Instead, Americans saved more. They saved 6.2 percent of their disposable income in the second quarter, the highest share in a year.
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