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Business & Technology
Apr 27 2012 4:24PM
 
US growth falls to 2.2%
US President Barack Obama. Picture: AFP
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US economic growth slowed sharply to 2.2% in the first quarter of the year, official data showed on Friday, a reading that will rekindle fears that the economy is headed for another spring stumble.

The broadest gauge of the world's largest economy, the data will give economists, policymakers and investors a sense that the recovery is airborne, but not gaining much altitude.

Gross domestic product (GDP) growth had hit 3.0 percent in the final quarter of 2011.

"The US economy is clearly expanding, but just as clearly it's expanding at a rate that is too slow to put reliable, significant downward pressure on joblessness," said Josh Bivens of the Economic Policy Institute.

US unemployment currently stands at 8.2 percent.

Ahead of Friday, data showing weak orders for long-lasting goods and a jump in shipping sent mixed messages about growth.

In the end the figures showed imports increased and government spending was down, both drags on the economy. Lower government spending alone shaved 0.6 points of the GDP total.

Economists' predictions about the figure had been as mixed as their views about the recovery itself.

Macroeconomic Advisors, which runs one of the most widely respected economic models, predicted that growth was close to 3.2 percent in the quarter.

Meanwhile economists at Mizuho, a global bank based in Japan predicted a 2.5 percent rate, in line with the Wall Street consensus.

The figures will help frame the crucial first steps of a general election race between President Barack Obama and Republican Mitt Romney that could hinge on voters' notions about the economy.

Released just as an economy-soaked battle for the presidency is joined, the GDP data is likely to color the opening exchanges of both general election campaigns.

Half of all US voters say the economy will be the single biggest issue in November.

While both sides are sure to spin the figure to suit their needs, it will likely be seen as a setback for Obama.

If growth had fallen under two percent, Obama's campaign would have faced a body blow. Similarly anything approaching three percent would have given him a shot in the arm and an opportunity to convince voters the recovery is firmly on track.

Yet Friday's data alone will not decide who wins the White House in November.

In the past, GDP growth has been an awful gauge of electoral fortunes. Dwight Eisenhower won reelection by a landslide with two percent growth, while Richard Nixon turfed out the Democrats with growth close to five percent.

The Commerce Department figures are annualised and incomplete. They are often subject to substantial revision.

-Sapa-AFP

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