The US economy continues to teeter on the edge of recession. GDP did expand modestly in the second quarter at an annual rate of 1.9%, but economists had hoped for better. Much of the boost came from government tax rebate payments which helped consumers add more buying power. The US economy continues to suffer from the housing sector downturn but less severely.
Consumer spending – which accounts for two-thirds of US economic activity – grew at a 1.5% annual rate. Spending on homebuilding contracted by 15.6%, but that was not as much as in the first quarter and core inflation – which excludes food and energy – rose at a 2.1% annualised rate.
At the same time, the Labour Department reported a sharp jump last week in the number of US workers filing first-time claims for jobless benefits. They rose by 44,000 to 448,000 – the highest level in five years. However officials said the figures were higher because of a new programme set up to locate people who are eligible for benefits.