GDP report: Economy grew at just 1.5%

istockphoto.com

(CBS/AP) WASHINGTON - The U.S. economy grew at an annual rate of just 1.5 percent from April through June, as Americans cut back sharply on spending. The slowdown in growth adds to worries that the economy could be stalling three years after the recession ended.

The Commerce Department also said Friday that the economy grew a little better than previously thought in the January-March quarter. It raised its estimate to a 2 percent rate, up from 1.9 percent.

Growth at or below 2 percent isn't enough to lower the unemployment rate, which was 8.2 percent last month. And most economists don't expect growth to pick up much in the second half of the year. Europe's financial crisis and a looming budget crisis in the U.S. are expected to slow business investment further.

Gus Faucher, a senior economist at PNC Bank, told CBS Radio News, "There's a lot of unease about what's going on there and the potential for a financial collapse or a collapse in the eurozone. That's making businesses anxious, it's weighing on stock prices and that's hurting spending by high-income households."

"The main take away from today's report, the specifics aside, is that the U.S. economy is barely growing," said Dan Greenhaus, chief economic strategist at BTIG LLC. "Along with a reduction in the actual amount of money companies were able to make, it's no wonder the unemployment rate cannot move lower."

Stock futures rose slightly after the report was released. Some economists had thought the growth estimate would be even lower.

The lackluster economy is raising pressure on President Barack Obama in his re-election fight with Mitt Romney, the presumptive Republican presidential nominee.

But few think the Fed, the White House or Congress can or will do anything soon that might rejuvenate the economy quickly. Many lawmakers, for example, refuse to increase federal spending in light of historically large budget deficits.

Paul Dales, senior U.S. economist at Capital Economics, said that the sluggish second quarter growth rate is probably not weak enough to trigger more action by the Federal Reserve when it meets next week.

Many economists, however, believe the Fed will launch another round of bond buying at its September policy meeting. The aim is to drive long-term interest rates lower and encourage more borrowing and spending.

The 1.5 percent growth rate in the second quarter was the weakest since the economy, as measured by the gross domestic product, expanded at a 1.3 percent rate in the July-September quarter last year. GDP measures the country's total output of goods and services, from the purchase of a cup of coffee to the sale of fighter jets.

Current-dollar GDP increased at an annual rate of $117.6 billion in the second quarter to $15.6 trillion.

Growth was weaker mostly because consumer spending slowed to a growth rate of just 1.5 percent. That's down from 2.4 percent in the first quarter. Americans bought fewer autos, computers and other long-lasting manufactured goods. Spending on services increased.

They also saved more. The savings rate increased to 4 percent, up from 3.6 percent in the first quarter.

Consumer spending, which accounts for 70 percent of economic activity, was offset somewhat by a slightly smaller drag from the government. Spending by governments fell at an annual rate of 1.4 percent in the second quarter, just half of the 3 percent rate of decline in the first quarter.

The Commerce Department also revised its growth estimates for the past three years. Those revisions showed that the economy contracted 3.1 percent in 2009, slightly less than the 3.5 percent previously reported. Growth in 2010 was put at 2.4 percent, down from 3 percent, with growth in 2011 at 1.8 percent instead of 1.7 percent.

The U.S. economy has never been so sluggish this long into a recovery. The Great Recession officially ended in June 2009.

Until a few weeks ago, many economists had been predicting that growth would accelerate in the final six months of the year. They pointed to gains in manufacturing, home and auto sales and lower gas prices.

But threats to the U.S. economy have left consumers too anxious to spend freely. Jobs are tight. Pay isn't keeping up with inflation. Retail sales fell in June for a third straight month. Manufacturing has weakened in most areas of the country.

Fear is also growing that the economy will fall off a "fiscal cliff" at year's end. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget agreement.

All that is making companies reluctant to expand and hire much.

[jmn122736]

Dow March 6, 2009 = 6,626.94 >>> Dow 7/27/2012 = 13,094.88, nearly doubled over last 3 years.

Not one word from republicans lately, Wonder what their response would be if the numbers were reversed?

[arthanyel]

We are certinaly not back to where we were, but trillions of dollars in retirement savings and other middle class wealth has been recovered - so you can't say that things are "far worse" than they were in 2009. They are FAR BETTER.

Just not good enough.

[aintfakin]

hillzhaveays July 27, 2012 12:55 PM EDT
#2 on the list of sure fire ways to know that a Libbie has heard a fact they don't like:

Their comment will simply say something about Lies, without any sort of evidence to refute. Classic Head-Up-A** response.
-----------------------------------
excrement coming from what passes as a right wing mouth
Obama cut the social security taxes on wages...key word is wages.... not Robmee like cap gains.
any proposed Obama tax increase has ALWAYS been on people making 250,000 and above...most of which still would not bring them in line with the percentage paid by wage earners. .
You know that's true and you cant help but lie anyway. and dont hand me the complete lie that Obamacare is the biggest tax increase in history. My current health insurance and health costs are the biggest rape in history.
2 kinds of republicans
1. millionaires (aka liars)
2. Suckers (not just ignorant but stupid as well)

[aloy69]

GDP is at 1.5%. But the DOW topped 13,000. Yeah!
I wonder how the GOP can spin this one. President Obama and the Democrats are taking this country in the right path to growth, slowly and steadily. GOP can gripe and complain, but there is no turining back. FORWARD 2012!

[jeannutson]

The growth prospect of the US economy for the year looks very bleak with all the poor domestic results such as poor corporate earnings,slow hiring and high unemployment,low consumer confidence,Europe's debt crisis and the general global economic slowdown very much likely to impede and hamper any growth.

[arthanyel]

by wfw3536 July 27, 2012 1:54 PM EDT
I don't know where you live or if you travel much, but most Americans are hurting. Since Obama came into office they receive over 2,000 dollars less in their paychecks, 25% of mortgage holders are underwater and may lose their homes, and with a GDP of 1.5% and going lower we are looking at a second recession. Just look at the European model Obama is following, most of the countries are on the brink on bankruptcy and have spent money they had to borrow, does sound familar as Obama has spent over 5 trillion we had to borrow. You are really out of touch just like Obama and his failed policies.

----- cut heree -----

Let's take those in order:

1) Most Americans have $2,000 less in their paychecks due to Obama. Utter nonsense. Obama has lowered taxes further on the vast majority of Americans, added additional tax credits for many. Where do you get this crazy stuff?

2) 25% of mortgage holders are underwater. As compared to the 35% that were the same in early 2009 when he took office?

3) GDp is +1.5%. As opposed to the MINUS 7%+ when he took office?

4) Obama follows European model. Conservative propaganda. 100% fact free. The only thing Obama has done to expand the social support system since taking office is the health care act, and even that doesn't APPROACH socialized medicine.

5) All European countries on the brink of bankruptcy. Poppycock. Some are (Spain, Greece for example). Others are doing INCREDIBLY well (Germany, Sweden, Finland, Denmark, and the UK to name a few).

6) Obama spent 5T we had to borrow. Poppycock. Obama walked into office with a STRUCTURAL deficit of 1.1T per year. You mean "Republicans and Bush borrowed 4.4T thanks to their tax cuts, their wars, their unfunded health and education mandates"

I am not the one that is out of touch. I don't claim Obama is perfect - I have a great many issues with his presidency, not the least of which is that I didn't want a campaigner in chief, I wanted a visionary leader. But compared to the ALTERNATIVE he is far and away a better choice that the Tea Party and Grover Norquist, which is who would be running the country of Romney got elected.

[rider1956]

Here's the choice: 1) a Harvard grade who knows about business and get his level-entry experience with the American economy or, 2) a person who has had a real job in the business sector with real experiences about job growth and knows how to create business.

[Dreadnut]

Where's that big, booming economy we left behind, a mere 4-5 months ago? Back then, you liberals were singing "He's a jolly good fellow" for Obama and his wonderful policies that got us here. What, you sing a different tune now, and it's all the republicans fault?

[jmn122736]

If Cutting taxes works so well, then perhaps someone can explain why the national debt leaped from $1 trillion on Sept 30, 1981 to $11.9 trillion on Sept 30, 2009; (all republican proposed budgets except during the Clinton years.)

President Carter's last proposed-budget was in effect from October 1980 until Sept 30, 1981

President Bush's last proposed-budget was in effect from October 2008 until Sept 30, 2009.

For all who question these dates and statistics: The dates and debt increase data came from official government records. Just Google: Government - Historical Debt Outstanding - Annual



BTW, Few people realize (or they refuse to believe) that The ONLY reason this Deep recession has (so far) actually been prevented from turning into a second Great depression is the tremendous amount of stimulus spending by both President Bush and President Obama, and the MAJOR reason the economy (read jobs) has been improving so slowly is the fact that there are no longer any manufacturing jobs left in America.
Manufacturing both stimulates the economy by recirculating money, and creates jobs.

It should be obvious to everyone that jobs will not return until American wages decline to that of the cheap labor countries, that is; WITHOUT government intervention/regulation.
Which would you rather have, more regulation or third-world wage levels?

One more question: If tax cuts create Jobs, how did this Bush/Cheney fiasco ever happen in first place? And while you are at it you might explain how sustaining those tax cuts can reduce the debt?

[jmn122736]

I never expected any honest answers, However, posting the obvious, as well as documented facts, is important in motivating people to keep an open mind.

Fortunately, people worldwide read both my comment and those of all responders, and they are the ones to judge the accuracy and integrity of the posters.

I/m very comfortable with that.

[arthanyel]

Thanks to another poster for the following. Some of the links are to liberal propaganda sites so make sure to check your facts, but overall a nice summation.

Republican Lies About Jobs:
http://www.huffingtonpost.com/2012/07/24/republican-jobs-bills_n_1687647.html
http://republicanjobcreation.com/

Republican Lies About Small Business Taxes:
http://www.slate.com/articles/business/small_business/2012/07/small_business_tax_myths_most_firms_are_not_affected_by_obama_tax_proposals_.html

Republican Lies About The Economic Recovery:
http://www.foreignpolicy.com/articles/2012/07/23/how_republicans_sabotaged_the_recovery

Republican Lies About Obama Spending:
http://www.forbes.com/sites/rickungar/2012/05/24/who-is-the-smallest-government-spender-since-eisenhower-would-you-believe-its-barack-obama/

Republican Lies About Taxes On Corporations:
http://www.zerohedge.com/contributed/2012-07-23/why-you-pay-too-much-taxes

Republican Lies About Obamacare:
http://blogs.detroitnews.com/politics/2012/07/03/republicans-lies-and-obamacare/

Republican Lies About Big Oil:
http://thinkprogress.org/climate/2012/07/24/574161/what-five-oil-companies-did-with-profits/

Republican Lies About Taxes On Citizens:
http://www.cbpp.org/cms/index.cfm?fa=view&id=3505

[arthanyel]

by hillzhaveays July 27, 2012 12:09 PM EDT
by arthanyel July 27, 2012 11:17 AM EDT
Sad news but not shocking. With the GOP blocking every attempt by Obama to improve the economy since the middle of 2010, the results are starting to be felt.
________________________________________

Liberal fluff and propaganda, arth. You just sound ignorant.

What the GOP blocked was higher taxes, on anyone, including the rich, at a time when economic growth is teetering on another recession. Obama does not understand that business will not just continue as normal, just with higher taxes. They will react and the reaction will not benefit job growth. Most adults with an education understand this.

----- cut here -----

Nonsense.

The GOP has been blocking every attempt Obama has made to improve the economy since mid 2010. This is not propaganda; this is merely a statement of fact. You can argue that what Obama wants to DO will not improve the economy, and that is what the GOP has argued - which is their opinion - but you can't argue with the fact they have been blocking him, and therefore the current economic trajectory is based on their blockage, not based on Obama's actions.

The GOP has blocked higher taxes - even with tax rates at historically low levels, even for millionaires and billionaires that can easily afford it. As a result of forcing taxes to be low, the GOP has also forced cuts in spending which results in higher unemployment which HURTS THE ECONOMY.

Your statement that higher taxes will hurt job growth is conservative fluff, unsupported by any rational economic analysis. ALL non-partisan economists, and most partisan ones, will tell you that allowing tax rates on the top 1% to return to the Clinton era rates will have NO IMPACT AT ALL on job growth, and that actually for a business increasing their tax rate while also providing tax incentives for desirable behavior (like hiring unemployed people) is a GREAT WAY to improve the economy.

You say "most adults with an education understand" your propaganda, actually it's exactly the opposite. That's why the conservative base is largely uneducated and relies on intuition and faith instead of on science and analysis. Because idf you talk to a real economist that isn't a conservative shill and ask for the real math behind economics, you would see how silly the conservative "trickle down economics" theory is - as it has been discredited by EVERY LEADING ECONOMIST on earth.