US economic growth slows down sharply in 2011

• First quarter economic growth revised down to 0.4% • Consumer spending grew 0.1% in second quarter • Shares fall sharply The US economy ground to a virtual halt in the first half of the year, with consumer spending at its weakest level in two years. The shock figures sent shares tumbling in London. The FTSE 100 index extended losses to fall 84 points to 5789, a decline of 1.4%. Wall Street futures indicate that the Dow Jones will fall 116 points at the open. The data comes at a time when the White House and Congress are locked in a battle over how to raise the debt ceiling to allow the government to borrow more money . If they cannot agree, the government will soon run out of money, leaving it unable to pay its bills, such as social security payments, military pay and interest payments. The world’s largest economy grew at an annualised rate of 1.3% between April and June, the US Commerce Department said. Wall Street economists had expected 1.8%. Moreover, the first quarter growth rate was revised sharply lower to 0.4% from 1.9%, which means the economy barely grew over the first six months of the year. Growth in the fourth quarter of last year was also revised down, to 2.3% from 3.1%. Consumer spending grew by just 0.1% in the second quarter, the weakest since the recession ended two years ago. Car production was severely disrupted by the earthquake in Japan. Economists said the data could prompt the Federal Reserve to restart its quantitative easing (QE) programme to pump money into the economy. “While this is somewhat disappointing, the big surprise is in the revisions, which show growth being downgraded sharply in the first and fourth quarters,” said James Knightley, senior economist at ING. “Furthermore, the recession was deeper and started earlier than previously thought. his further reduces the prospect of any Fed policy tightening and offers some support to those arguing the case for QE3.” This means the US economy contracted by 0.3% in 2008, rather than posting zero growth, while in 2009 the economy shrank by 3.5% rather than 2.6%. The economy needs to grow by at least 2.5% to bring down the country’s 9.2% unemployment rate. US economy Economics United States Julia Kollewe guardian.co.uk

Posted by on July 29, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.