U.S. Economic Growth Slowed to 1.5% in Second Quarter

By MARTIN CRUTSINGER

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.

"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.

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Robert & Lisa

Two straight quarters of declining GDP numbers. Time for a change in November.

July 30 2012 at 11:16 AM Report abuse -3 rate up rate down Reply
susan

So is it who do we blame for this, rather than we all knew it was just a matter of time.

July 30 2012 at 3:30 AM Report abuse +2 rate up rate down Reply
renner1234

When are the American people finally going to see what Obummer/Democrats really are.

They are failures when it comes to economics and growing the US economy.

I keep hearing how smart Obummer is and I do not believe that because the results of democratic/Obummer economics has been nothing but a failure.

the democratic keep backing this Obummer , he has let all American down and poorer.

!.5% GDP growth, how pathetic.

Soon America will be a third world debtor country, Thanks to Obummer.

July 30 2012 at 12:58 AM Report abuse -4 rate up rate down Reply
1 reply to renner1234's comment
dxl504

We are in a global economy and NO president can fix that. Most people like you obviously don't understand that. Instead anything and everything to attack the president.What exactly is Romney going to do for us. Look at his record. Made millions destroying jobs and lives of middle class people and the man can sleep at night. When he was governor his state went from 37th in job growth to 47th in job growth. So what is his plan? I hear he likes the way Bush did it. Well we were only shedding 700,000 jobs a month when Obama took office. A.5% GDP growth is far better then what Romney is going to bring us. Obama 2012

July 30 2012 at 1:03 AM Report abuse +4 rate up rate down Reply
propackage

what this all says is that the government and the economists know very little if anything. the only thing that they used to do that worked a little was say things are turning around and a small minority of people would react to that and spend, making the economy move a little through increased spending. But you know what they say fool me once shame on you fool me twice shame on me, so that do3sn't work that well anymore. Additionally credit card interest is at an all time high in relation to the prime so no one wants to get into debt. What we really need is fewer politicians. I is obvious that politicians are always going to spend, so if we have less of them we will start to cut spending.

July 30 2012 at 12:34 AM Report abuse +5 rate up rate down Reply
Chris Smith

Romney will be much better for the economy, Obama is incompetent.

July 29 2012 at 10:58 PM Report abuse +2 rate up rate down Reply
1 reply to Chris Smith's comment
dxl504

Your pretty incompetent if you think that. How is Romney going to be better. His track record is search and destory when it comes to jobs. He plans on cutting taxes on the rich and screwing the poor. Again I say this is a global economy and NO ONE can fix it by themselves.

July 30 2012 at 1:04 AM Report abuse +1 rate up rate down Reply
2 replies to dxl504's comment
susan

If Obama had the same background as Romney, the reports would be hidden and the documents sealed. So whats do different than what we face now.

July 30 2012 at 3:32 AM Report abuse -1 rate up rate down
defelicep

Search and destroy? Please explain to me how a person creates the wealth he has by buying companies and "destroying" them? You folks on the left really are dumb. It's hard to believe that you'd fall for Obama's stupidity.

July 30 2012 at 7:28 AM Report abuse -1 rate up rate down
hmstrac

What's that saying , "re-electing Obama is like backing up the Titanic for a second run at the ice berg" Or "curing
dysentery by drinking Mexican tap water" . Oh well its an election year.

July 29 2012 at 9:43 PM Report abuse +1 rate up rate down Reply
1 reply to hmstrac's comment
dxl504

Lets talk Titantic with Romney as president we will be a sinking ship. The rich will get the life boats and the rest of us will be locked below to drown.

July 30 2012 at 1:05 AM Report abuse +2 rate up rate down Reply
1 reply to dxl504's comment
democracks0

Obamas rich so I guess he'll get a life boat. Obamites think only Republicans are rich. Obama gave tax cuts to rich people like himself.

Did you check out that $6800.00 jacket Michelle was wearing? You can afford those things when you're the 1% like the Obamas. Or in this case when the tax payers foot the bill

Obama hasn't met with his jobs council in nearly 7 months yet lies and says he laser focused on jobs. Yeah he's laser focused alright on saving his own hide.

You are such a goody goody little Obamite soldier. You Obamites are hilarious

Obamas wasn't even a good community organizer. Obamas a fiasco

July 30 2012 at 7:54 PM Report abuse -1 rate up rate down
ragtopdaz

This story sounds a little like one that was run a few weeks ago about another idiot who was scammed into thinking that Obama was going to pay her electric bill as well as her past cable bills she occurred after losing her job... No job, no problem..

July 29 2012 at 8:29 PM Report abuse -1 rate up rate down Reply
MALT

The president simply doesn't have the tools to get the economy humming. He doesn't know how and doesn't have the people around him that know how either. We are doomed,doomed I tell you.

July 29 2012 at 6:12 PM Report abuse +4 rate up rate down Reply
3 replies to MALT's comment
aptp356

We are never comeing out of this world wide depression until Phil Gramm's "Futures Tradeing Reform" 2000 is repealed. Give control of oil futures back to the CFTC who base the price of oil on supply and demand,the CFTC has no interest in driveing up the price of oil as Wall Street oil futures tradeing scum have. The least glimmer of hope for the worlds economies and they drive the price up we have watched this happen over and over.. Phil and his rollypolly wife Wendy should both be in jail for selling their public offices.

July 29 2012 at 6:06 PM Report abuse -1 rate up rate down Reply
Pllc15

Justifiably or not, President Obama's legacy will be that of a failed presidency attempting to revive an ailing economy with Keynsian principles. His only recourse is to get reelected to change that legacy with different approaches. 101 economic text books will be changed by including case studies from the limited affect government spending had on our economy.

July 29 2012 at 5:32 PM Report abuse rate up rate down Reply