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| US economy: GDP growth much weaker than thought | US economy: GDP growth much weaker than thought |
| (40 minutes later) | |
| US economic growth is much weaker than first thought, government figures show. | US economic growth is much weaker than first thought, government figures show. |
| 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%. | 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%. |
| And in a surprise move, first-quarter growth was revised down sharply from 1.9% to 0.4%. | 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. | 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. |
| President Obama is due to make a statement about the debt crisis shortly. | |
| US markets opened lower, with the Dow Jones, the S&P 500 and the Nasdaq all falling 1% in early trade. | |
| European markets, which were already in negative territory, saw further falls after the figures were released. | |
| 'Shocking' | 'Shocking' |
| Economists had expected steady growth in the second quarter, now that supply constraints from Japan after the earthquake and tsunami are easing. | 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. | 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%. | 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. | 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. | 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". | 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. | "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." | "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." |
| Worse recession | |
| The Commerce Department's Bureau of Economic Analysis makes annual revisions to its GDP estimates every July, incorporating more complete and detailed data. | |
| It now says that the US recession of 2007-2009 was more severe than previously reported, with the economy shrinking by 5.1% over that period, rather than 4.1%. | |
| But it also says that growth in 2010 was a bit stronger than it had first estimated. | |
| It now puts 2010 growth at 3%, up from the previous 2.9%. |