US growth curbed by cautious consumers

Now Reading:

US growth curbed by cautious consumers

US growth curbed by cautious consumers
Text size Aa Aa

US economic growth slowed in the second quarter of the year.

Gross domestic product expanded by 1.5 percent between April and June from the same period last year.

First-quarter growth was revised up slightly to a 2.0 percent pace.

Output for the fourth quarter of 2011 was raised to a 4.1 percent rate from 3.0 percent.

Between April and June consumer spending slipped to its lowest pace in a year particularly as Americans bought fewer long-lasting goods such as cars due to tepid job and income growth.

Time for stimulus?

The GDP slowdown was expected but increases the pressure on US policymakers to do more to bolster the recovery.

It strengthens the argument for the Federal Reserve to offer the economy additional stimulus at its September meeting.

T“he US economy has lost altitude and flying pretty close to stall speed. Monetary policy is the only game in town and additional easing is highly likely,” said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo, California.

But not all economists believe the Fed will pump more money into the economy in September, arguing that the slowdown in growth was not that alarming. They said the Fed would want to save its limited arsenal for a real crisis.

“The Fed will pull the trigger on QE3 if the sense is we are getting into trouble, but if we are just weak and somewhat limping forward, they will prefer to stay pat,” said Adolfo Laurenti, deputy chief economist at Mesirow Financial in Chicago.

“They do not want to use whatever ammunition they have left too soon, they want to keep some just because things might get even worse later on.”

White House reaction

A top White House official stressed that the US economy continues to grow despite a tepid second quarter, and acknowledged faster expansion was needed to stoke more hiring.

“While the economy continues to move in the right direction, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007,” Alan Krueger, chairman of the Council of Economic Advisers, said in a statement.

Sluggish growth and stubbornly high unemployment may threaten President Barack Obama’s re-election chances in November.