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GDP growth falls sharply in 2Q

By Ariana Eunjung Cha

The Commerce Department slashed its estimate for U.S. GDP growth in the second quarter from a 2.4 percent annual rate to 1.6 percent, confirming fears that economic growth has slowed to a crawl.

While the numbers were grim, they were expected to have been worse. The growth rate topped calculations by economists who had forecast that the earlier estimate would be almost halved to an annualized rate of 1.4 percent.

Corporate investment in such big-ticket items as new machinery and computers drove a lot of the growth in the second quarter but trouble in the nation's housing sector, unemployment and, especially, trade all were a drag.

The government said the trade deficit subtracted almost 3.4 percentage points from second-quarter GDP--the largest hit from trade in 63 years.

"The deceleration in real GDP in the second quarter primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment," the Commerce Department said.

The trade deficit spiked an abrupt 16 percent in June, due to the largest surge in imports in 26 years. The unemployment rate remains stuck at 9.5 percent and first-time unemployment claims continue to remain at levels much higher than what's considered healthy for the economy. Sales of existing homes and new homes in July hit record lows.

The government report showed that companies reigning in inventories also contributed to slower GDP growth. The Commerce Department said earlier this week that orders for durable goods rose a bare fraction of what experts had predicted.

While the economy has grown for the past four quarters, the deceleration in growth has been rapid.

The 1.6 percent growth rate in the April to June quarter compares with a solid 3.7 percent in first quarter of this year and a breakneck rate of 5.7 percent in the final quarter of 2009.

Many economists expect the nation's GDP to continue at a similarly weak pace through the rest of the year and have expressed worry that we're headed toward another recession.

New York University economist Nouriel Roubini put the odds of a double-dip recession at 40 percent while Mark Zandi, the chief economist at Moody's, said his estimate is 33 percent.

Later Friday morning, Federal Reserve Chairman Ben Bernanke is scheduled to deliver a major policy speech at an economic symposium in Jackson Hole, Wyo. that will provide another perspective on the economy.

Investors are eagerly awaiting whether the Fed will take any additional action to prop up the economy. But with interest rates near zero and Congress preoccupied with mid-term elections, it's unclear what steps could be taken.

Goldman Sachs analyst Alec Phillips wrote in a research note that while "we expect monetary policy to do most of the lifting from here, there is a clear role for fiscal policy if lawmakers choose to use it."

Phillips said that the effect of the Obama Administration's massive $862 billion stimulus has faded to "essentially neutral" in the current quarter. "[T]he challenge for the administration and lawmakers returning to Washington over the next couple of weeks isn't just how to boost growth from here, it's how to avoid policy outcomes that slow it further," he said.

By Ariana Eunjung Cha  |  August 27, 2010; 9:00 AM ET
Categories:  U.S. Economy  
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Next: Scholars: Lackluster recovery is par for the post-crisis course

Comments


RECOVERY SUMMER!!!!

HOPEY CHANGEY!!!!!

THANKS BARRY!!!!

Posted by: Nov2010_ | August 27, 2010 9:31 AM | Report abuse

This can't be right. Joe "Biteme" said the "summer of recovery" is right on track. Who am I to believe my lying eyes or the Obonehead administration.

Posted by: Anonymous | August 27, 2010 9:33 AM | Report abuse

How long until it's no longer Bush's fault?

Posted by: bandsposs | August 27, 2010 9:39 AM | Report abuse

Great..... I was very glad to see Obama was catching up on his reading and getting in a little golf. I never knew how exhausted a person can get from criticizing, blaming others, doing nothing, and taking vacations.


Ask yourself: What if a republican was doing this?

Posted by: OldSoldier4 | August 27, 2010 9:39 AM | Report abuse

In 10 years time, when analysts look back at the Great Recession of 2008 - 2010, they will conclude that there never really was a recovery in 2010. The so-called "W" shaped recovery that we appear to be experiencing would probably be better described as a flat-bottomed "U" shaped recovery with the bottom of the "U" being a longer period of time than the normal economic downturns of the past 80 years.

It would also appear that the U.S. government is out of ammunition when it comes to further economic stimulus. Having already accumulated a $13.37 trillion debt and having annual debt interest payments of $400 billion (incidentally, their interest payments are larger than the GDP of the top 21 countries in the world), they simply do not have the financial means to add further stimulus should it become necessary (as it already appears to be). As well, the recent commentary from Moody's suggests that the Aaa credit rating for U.S. debt could possibly be downgraded which would increase the stress on the American economy.

To read more about the debt situation in the United States, see:

http://viableopposition.blogspot.com/2010/08/united-states-waiting-on-debt-downgrade.html

Posted by: Baywoodfarm | August 27, 2010 9:42 AM | Report abuse

But Hussein Obama the chinese mole will not use the word unprecedented this time!
But way to use it: Barack Hussein Obama is an unprecedented failure as a president. He has managed to make Dubya appear to be a wise statesman.

Posted by: SSTK34 | August 27, 2010 9:42 AM | Report abuse

Obama's plan to destroy the Great Satan seems to be working.

Posted by: carlbatey | August 27, 2010 9:42 AM | Report abuse

So the trade deficit is huge, even with the dollar in the dumps? We've lost more than 30% against the yen in the last few years, and even more against gold and silver. The only reason the dollar hasn't slumped badly against the pound and euro is because those currencies are as badly off as ours is. Given these conditions, imports should be expensive, and our trade deficit should be shrinking.

Oh, wait...China still refuses to unpeg its currency. That's part of the problem.

The other part of the problem is that we don't have any manufacturing left in this country, and so we have no choice but to import. Even if we wanted to cut imports, we couldn't. We can't recover by narrowing our trade deficit through domestic manufacturing jobs because there are no such jobs to be had, and so we simply keep importing at higher and higher prices, which slows the recovery more and more.

Didn't naysayers point out that the stimulus bill would have a limited effect for maybe 18 months before the economy slumped further? Guess what...the clock is ticking.

Posted by: blert | August 27, 2010 9:46 AM | Report abuse

Those darn tax cuts for the wealthy. (Only a democrat would say letting someone keep more of what they earned is a Tax Cut!)

Bush is an idio... Oh wait... This just in..."Pelosi thinks we may have to extend those tax 'cuts'...

Yea... But it was still a dumb idea when Bush thought of it!

Posted by: OldSoldier4 | August 27, 2010 9:46 AM | Report abuse

So, it appears that Hopey-change's "summer of recovery," like Hoover's before him, is "just around the corner." How could this have happened, what with the Messiah in charge and all? Let's review the evidence. Hopey-change came into a very bad situation (in fact, it played a huge part in his election), but instead of focusing on economic growth and credit availability the "progressive" geniuses immediately stuffed almost $1 trillion down a very poorly designed stimulus rathole focused mostly on non-stimulating transfer payments. Then they decided to spend the next 14 months shoving an enormously expensive, job killing health care plan down the throats of an electorate that clearly did not want it. This was followed by a massive financial sector overhall law that no one has even bothered to read and is apparently full of credit-stifling unintended consequences. All the while they demonized job creators, promised massive new taxes and regulations on anyone who dared to be successful, mismanaged the Gulf disaster and knowingly killed 23,000 jobs with their deep water drilling moratorium. Even now they continue to push for a cap and trade regime with crushing consequences for any economic activity involving the use of energy. Is there any wonder why the economy is tanking?

This is what you get when you elect a bunch of "progressive" ideologues led by a guy who has never run so much as a lemonade stand in his whole life. At least he takes a lot of vacations, which give him that much less time to mess things up further.

How's that hope-n-change working out for y'all, anyway?

Posted by: Anonymous | August 27, 2010 9:47 AM | Report abuse

So, it appears that Hopey-change's "summer of recovery," like Hoover's before him, is "just around the corner." How could this have happened, what with the Messiah in charge and all? Let's review the evidence. Hopey-change came into a very bad situation (in fact, it played a huge part in his election), but instead of focusing on economic growth and credit availability the "progressive" geniuses immediately stuffed almost $1 trillion down a very poorly designed stimulus rathole focused mostly on non-stimulating transfer payments. Then they decided to spend the next 14 months shoving an enormously expensive, job killing health care plan down the throats of an electorate that clearly did not want it. This was followed by a massive financial sector overhall law that no one has even bothered to read and is apparently full of credit-stifling unintended consequences. All the while they demonized job creators, promised massive new taxes and regulations on anyone who dared to be successful, mismanaged the Gulf disaster and knowingly killed 23,000 jobs with their deep water drilling moratorium. Even now they continue to push for a cap and trade regime with crushing consequences for any economic activity involving the use of energy. Is there any wonder why the economy is tanking?

This is what you get when you elect a bunch of "progressive" ideologues led by a guy who has never run so much as a lemonade stand in his whole life. At least he takes a lot of vacations, which give him that much less time to mess things up further.

How's that hope-n-change working out for y'all, anyway?

Posted by: DoULiketheChange | August 27, 2010 9:48 AM | Report abuse

Continuing to refer to the President by his middle name is just as ignorant as blaming all negative economic news on Bush. Is there any intelligent life out there?

Posted by: Anonymous | August 27, 2010 9:48 AM | Report abuse

As a former Army Chief of Staff liked to say 'Hope is NOT a Method'

I guess the American people are finding that out, the hard way!!

November 2010 cannot get here fast enough!

Posted by: OldSoldier4 | August 27, 2010 9:49 AM | Report abuse

Anonymous...

Nanny, nanny, new, new, stick your head in dogey do...

Please, is criticizing folks who are simply stating a fact- Obumbler's middle name is Hussein- really wrong!

Posted by: OldSoldier4 | August 27, 2010 9:52 AM | Report abuse

We need to get this country back to work. We have too...many jobs that have left to overseas countries or to Mexico. The trade gap...is huge...because our government harms the employers here with taxes and tariffs to ship overseas. When our government gets back to helping our employers, we will see many jobs return to the United States.
What we have seen is lack of support to the companyies here. We see our Skilled Trades disappear, we have seen our Steel Mills shut down, the list conintues of jobs that have disappeared over the last 20 years.
We are reaping what we have sowed, because our Big Government and these people who are making the decisions in Congress have let this happen to all Americans!
Lets get our jobs back in this country...forget Cap n Trade another killer of jobs! Lets forget Green Energy another form of Taxes! Our people are hurting!

Posted by: azstormy | August 27, 2010 9:52 AM | Report abuse

Economics is very simple if you understand it. Economists in Washington and in universities don't. The promise of trade negotiations with China and Canada never materialized. Obama will pay a price for its free trade approach. See my results at http://knol.google.com/k/savings-and-growth#

Posted by: ckewu | August 27, 2010 9:52 AM | Report abuse

A song for the Dems: Sha NA NA NA Sha NA NA NA Hey Hey Hey Goodbye

Posted by: Anonymous | August 27, 2010 9:54 AM | Report abuse

But, Why is The Anti-Christ Obama Destroying America. If you truly want to know what is going on; Then you will have to accept these things as the TRUTH. Once you understand the following things; All things will be understood. So I tell you Obama is Satan on Earth, Lawless One, or what ever else you want to call this Demonic Figure. His words describe him, He is a False Hope, If you listen to him you will love him. He carries a Bow without an Arrow. He will conquer all through his speech, his false hoods will capture all who sit and listen to him.
2 Thessalonians 2:11-12
11And for this reason God will send them strong delusion, that they should believe the lie, 12 that they all may be condemned who did not believe the truth but had pleasure in unrighteousness.

Posted by: makom | August 27, 2010 9:54 AM | Report abuse

The elephant in the room that nobody will talk about is trade with China. We get cheap imports, but at the expense of domestic jobs. Is there anyone else out there who sees a problem with this???

Posted by: A1965bigdog | August 27, 2010 9:57 AM | Report abuse

It's no longer Bush's fault.

It's YOUR fault!

Obama and the Progressives have found someone NEW to BLAME.

They're blaming the people who's pockets they've cleaned out through union bailouts and "stimulus"...the hard working taxpayers! YOU.

Kick out the looney leftist Socialist Progressives in November 2010 and 2012.

Let them know who's fault it REALLY is!

Posted by: bob59 | August 27, 2010 10:00 AM | Report abuse

Great..... I was very glad to see Obama was catching up on his reading and getting in a little golf. I never knew how exhausted a person can get from criticizing, blaming others, doing nothing, and taking vacations.


Ask yourself: What if a republican was doing this?
---------------
Are you on drugs? Bush did exactly that for 8 years. Obama has taken what, 40 vacation days so far? Bush was at 150 vacation days by this time in his presidency, and he ended up with about 550 total vacation days. You can start complaining when Obama hits 500 vacation days.

Posted by: Independent4tw | August 27, 2010 10:05 AM | Report abuse

Recovery Summer - Mission Accomplished!

Posted by: GRILLADES | August 27, 2010 10:13 AM | Report abuse

Just think how bad the trade gap will be when all the drugs you guys buy from Colombia and Mexico are made legal.

Posted by: Anonymous | August 27, 2010 10:16 AM | Report abuse

Who is the nervous kid at the Washington Post's National Desk? I just called minutes ago, about 10am. His behavior is furtive and suspicious. He sounds like a 20 year old, and that is not a compliment. I had to call back to ask his name. He gave the name "Gordon."

What is going on here at the Washington Post? I had called some weeks ago, and his voice is very familiar. It was the same frightened demeanor. Strangely, he had this demeanor when first answering the phone. This was very suspicious. What on earth are you doing at this newspaper? You've got somebody who's afraid to answer the phone on the National Desk. This young male was full of fearful anticipation, a scared rabbit.

Do you know there is something suspicious going on in your organization?

Now you know. Deal with it.

Posted by: redd1 | August 27, 2010 10:16 AM | Report abuse

"The trade deficit spiked an abrupt 16 percent in June, due to the largest surge in imports in 26 years."

What in God's name is the American public buying, smart phones? It can't be gas, as the price of premium is trading below $3 a gallon at this point, indicative of weak demand.

Posted by: Anonymous | August 27, 2010 10:24 AM | Report abuse

TELL THESE PEOPLE IT'S THE "SUMMER OF RECOVERY." IT'S NOTHING MORE THAN MORE OF THE OBAMA DEPRESSION.


WEST PALM BEACH — Thousands of people are lined up this morning outside the Palm Beach County Convention Center - some arriving by the busload, hoping the Neighborhood Assistance Corp. of America will help them save their homes.

They are here from throughout the country, including Detroit and California.

"I'm here because I have to be," said P. Reed, who drove all night from South Carolina. "They put me in foreclosure last week."

The non-profit group opened the doors at 9 a.m. to begin a five-day marathon of around-the-clock loan modifications. The event, which is free, aims to get homeowners cheaper monthly mortgage payments through interest rate reductions, extending the life of the loan and a reduction in loan amount.

Posted by: twotimetuna | August 27, 2010 10:24 AM | Report abuse


RECOVERY SUMMER!!!!

HOPEY CHANGEY!!!!!

THANKS BARRY!!!!

Posted by: Nov2010_ | August 27, 2010 10:34 AM | Report abuse

"The trade deficit spiked an abrupt 16 percent in June, due to the largest surge in imports in 26 years." Washington Post, 8/27/2010

What in God's name is the American public buying then, smart phones? It can't be gas, as the price of premium is trading below $3 a gallon at this point, indicative of weak demand.

Posted by: concealed | August 27, 2010 10:51 AM | Report abuse

I cannot wait for Joe "Baghdad Bob" Biden to spin this one. It should be highly entertaining ...

Posted by: Anonymous | August 27, 2010 11:18 AM | Report abuse

I cannot wait for Joe "Baghdad Bob" Biden to spin this one. It should be highly entertaining ...

Posted by: cunn9305 | August 27, 2010 11:19 AM | Report abuse

GDP = private consumption + gross investment + government spending + (exports − imports).

I think the only part of this equation that has shown any growth over the past 2 years is government spending. And since the government is spending money that it doesn’t really have (meaning it either has to borrow it, or create it out of thin air), that’s not really “growth”.

So it can be misleading to use GDP as a measure of the growth of the economy.

Posted by: MDLaxer | August 27, 2010 11:59 AM | Report abuse

Barry rides a girl's bike. Some jokes just write themselves.... see drudge report.

Posted by: carlbatey | August 27, 2010 11:36 PM | Report abuse

The comments to this entry are closed.

 
 
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