Global Biz

US economic growth revised down to 1.6%

(Xinhua)
Updated: 2010-08-27 22:06

WASHINGTON - US economic growth was revised downward to an annual rate of 1.6 percent in the second quarter of this year, compared to an initial estimate of 2.4 percent, the Commerce Department reported Friday.

That was the slowest quarterly growth since US economic activity began to pick up in the second half of last year. Economists had expected a sharper revision to a pace of 1.4 percent.

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The US government usually releases three estimates of the quarterly Gross Domestic Product (GDP) -- the output of goods and services produced by labor and property located in the United States.

The deceleration in economic growth in the second quarter primarily reflected a sharp acceleration in imports and a sharp deceleration in private inventory investment.

Imports surged 32.4 percent last quarter, the largest since the first quarter of 1984, well exceeding a 9.1 percent rise in exports.

Contributions from business inventories proved to be less than initially estimated. It added 0.63 percentage points to GDP change, compared to the about 1 percent previously estimated.

Businesses began to replenish inventories that were depleted during the recession, which was a main driver of growth in the early stages of the recovery.

Historically, severe recessions were usually followed by strong rebounds, but this time proved to be an exception. During this recession, which spanned a period from the fourth quarter of 2007 to the second quarter of 2009, the cumulative fall in GDP was 4.1 percent, making this the deepest recession since 1947.

The anemic economic recovery and lackluster job creation prompted the Federal Reserve to take on new measures to spur the economy at its last rate-setting meeting.

The Fed decided August 10 to buy more Treasury securities and keep its holdings of securities unchanged instead of letting it shrink as previously planned, a move that indicates the Fed is prepared to take further actions if economic prospects continues to worsen.

Even this modest growth might proved to be short-lived, some pessimists believed. They argued growth in recent quarters was primarily driven by government stimulus, including federal government's 862-billion-dollar stimulus package and tax credit for homebuyers. But as the tax credit expired and federal stimulus began to fade, the economy might post even more modest growth in the coming quarters, if not a double-dip recession.