GDP grows slender 1.3% in second quarter
WASHINGTON (MarketWatch) — A new government report on the nation’s output showed the economy in much weaker shape than anticipated, casting doubt on the strength of the expected recovery in the final six months of the year.
Gross domestic product expanded at a paltry 1.3% annual rate in the second quarter, the Commerce Department said Friday, below the 1.6% growth rate that economists anticipated. See MarketWatch economic calendar.
But it was a drastic downward revisions to first-quarter GDP that stole the show and set economists on edge.
The new data on the inflation- and seasonally-adjusted value of all goods and services produced in the United States showed the economy barely grew at all in the January-to-March quarter, rising just 0.4% from the initially reported 1.9% improvement. At the same time, the government said the recession proved to be deeper than initially projected. See related story about the recession.
Mark Vitner, senior economist at Wells Fargo, called the GDP report a “game-changer.”
Congress might have to temper its zeal to slash government spending as part of any increase in the debt ceiling, he said.
“It does raise some legitimate questions how quickly we can reign in government spending without doing more harm than good,” Vitner said.