Economic growth lags in 2nd quarter
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In case anybody thought the economy was out of the woods, this morning brought another disappointing economic report. The Commerce Department revised down the rate at which the U.S. economy grew in the second quarter to 1% from an initial estimate of 1.3%. The reduction is primarily due to lower exports and reduced inventory.
The newly revised growth numbers reinforce the view that the economy remains in a very fragile state. First-quarter growth was an even worse 0.4%.
A slew of recent economic data point to continued economic weakness. Some reports appear to suggest that another recession might be in the cards while other data indicate that the economy is still growing, but at a crawl.
Consumer spending, the single biggest source of U.S. economic growth, rose 0.4% in the second quarter instead of 0.1% as initially reported. Still, that reflected a sharp pullback from 2.1% in the prior quarter.
Corporate profits rose 3.0% to $57.3 billion last quarter. The second revision of GDP is the first to include data on business earnings.
The report comes at the end of another volatile week on Wall Street. Stocks bounced up and down this morning as Federal Reserve Chairman Ben Bernanke revealed the Fed has no plans to boost the economy.
Meanwhile, the recovery continues to falter as Washington does nothing to allay citizens’ economic concerns. After Congress passed the underwhelming debt ceiling deal, they simply went home, leaving the nation’s biggest problems unsolved. Businesses are unable to plan ahead leaving billions of dollars on the sidelines that could be used to hire new workers and invest in communities. Washington must take decisive action to reverse the spending addiction that has driven the economy to the brink. Only when government spending is returned to a sustainable path can a sustained economic recovery take hold.