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US economy: GDP growth slows to 1.3% US economy: GDP growth much weaker than thought
(40 minutes later)
The US economy grew at an annualised rate of 1.3% in the second quarter, much slower than had been expected. US economic growth is much weaker than first thought, government figures show.
The Commerce Department also revised down the rate for the January-to-March quarter, from 1.9% to just 0.4%. The economy grew at an annualised rate of 1.3% in the second quarter, the Commerce Department said. Economists had forecast growth of 1.8%.
On Thursday, a key vote in Congress on a Republican bill to raise the US debt limit was delayed. And in a surprise move, first-quarter growth was revised down sharply from 1.9% to 0.4%.
There is also much uncertainty at the moment as to how the current row about the US debt crisis will affect its economic recovery.
If Congress does not raise the debt limit by 2 August the US government could face funding shortfalls that it cannot meet by extra borrowing.If Congress does not raise the debt limit by 2 August the US government could face funding shortfalls that it cannot meet by extra borrowing.
'Shocking'
Economists had expected steady growth in the second quarter, now that supply constraints from Japan after the earthquake and tsunami are easing.
The main reason for the lower-than-expected second-quarter figure was that consumer spending virtually ground to a halt, growing by just 0.1%, compared with 2.1% growth in the first quarter.
Compared with the previous quarter, the economy grew 0.3%.
The large downward revision to the first quarter's growth figure was made as a result of lower capital investment and higher imports than first thought, and adjusting how seasonal factors are taken into account.
In addition, growth for the fourth quarter of 2010 was revised down from 3.1% to 2.3%, indicating that the economy had already started slowing before the end of last year.
Tim Ghriskey, chief investment officer at Solaris Asset Management, said the figures were "shocking".
"Clearly this is evidence of a mid-cycle slowdown. The only question now is do we see a pick-up in the second half and so far the economic data to date doesn't suggest that.
"You might have some analysts come out and talk recession, talk about a double dip. Right now none of the forecasts even come close to that but this is weak data."