WASHINGTON — The U.S. economy has slowed considerably this year from a year ago, according to a report from the U.S. Commerce Department released on Friday.
The country’s gross domestic product, a broad measure of the goods and services produced across the economy, grew at an annual rate of 1.3 percent in the second quarter, after having grown at an annual rate of 0.4 percent in the first quarter, a number that was revised sharply down from earlier estimates of 1.9 percent.
Both figures were well below economists’ expectations.
Data revisions going back to 2003 also showed that the 2007-2009 recession was deeper, and the recovery to date weaker, than had been estimated.
Indeed, the latest figures show that the nation’s economy is smaller than it was in 2007, when the Great Recession officially began.
“The word for this report is ‘shocking,’” John Ryding, chief economist at RDQ Economics, said. “With slow growth, higher inflation, and almost no consumer spending growth, it is very tough to find good news.”
The latest figures come as Congress is debating how to put the nation on a more sustainable fiscal path, with measures that some economists worry could slow the recovery further and even throw the economy back into recession.
Even in the absence of more austerity measures, some of the government’s stimulative policies, such as the payroll tax cut, are phasing out, and state and local governments are slashing spending dramatically.
“There’s nothing that you can look at here that is signaling some revival in growth in the second half of the year, and in fact we may see another catastrophically weak quarter next quarter if things go wrong next week,” Nigel Gault, chief U.S. economist at IHS Global Insight, said.
Prolonging the continuing talks in Washington to raise the amount of money the United States can borrow could damage prospects for growth in the third quarter, he said, because the resulting uncertainty and threat of federal default are “surely paralyzing businesses and consumers,” making them reluctant to make the big purchases that keep the economy humming.
Usually, a sharp recession is followed by a sharp recovery, meaning the recovery growth rate is far faster than the long-term average growth rate; last quarter, though, output grew at only about one-third of the average rate seen in the 60 years preceding the Great Recession.
As a result, the country’s output is far below its potential.