Fewer exports and weaker growth in business stockpiles led the Commerce Department to lower its estimate for the April-June quarter from its previous rate of 1.3 percent growth. That means the economy expanded only 0.7 percent in the first six months of the year.
Economists note that nine of the past 11 recessions since World War II have been preceded by a period of growth of 1 percent or less. The weaker growth could rattle an already edgy stock market, which has lost 12 percent of its value since July 21.
The report shows the economy was barely expanding even before this month’s stock market plunge. Economists worry that the Wall Street sell-off could cause consumers and businesses to pull back on spending and investment.
High gas and food prices have already eroded consumers’ buying power. Spending increased only 0.4 percent in the April-June period, the weakest growth since the final three months of 2009. The revision showed spending was a bit higher than the government’s first estimate of 0.1 percent growth.
People bought fewer long-lasting manufactured goods, such as autos and appliances. Those purchases fell 5.1 percent this spring, the biggest drop since the final three months of 2008. That partly reflects a shortage of autos on many dealer lots after the March 11 earthquake in Japan. Consumers spending accounts for 70 percent of growth.
Government spending contracted for the third straight quarter. And spending by state and local governments declined for the seventh time in eight quarters.
Several reports have suggested the economy worsened in the July-September quarter.
— This article appeared on page B1 of the Albuquerque Journal