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Published: Thursday, 9/29/2011

Economy grew at weak 1.3 percent rate in April-June period

Slight improvement seen rest of year

BY MARTIN CRUTSINGER
AP ECONOMICS WRITER

WASHINGTON — The economy grew slightly faster in the spring than previously estimated but remained dangerously weak as the country struggled with surging gas prices and high unemployment.

The Commerce Department says the economy grew at an annual rate of 1.3 percent in the April-June quarter, up from an estimate of 1 percent made a month ago. The improvement reflected modestly more consumer spending and a bigger boost from trade.

Even with the upward revision, the economy grew at an annual rate of just 0.9 percent in the first six months of the year. That's the weakest six-month performance since the recession ended more than two years ago. Many economists say there will be only a slight rebound to growth of around 2 percent in the current July-September quarter.

Though most economists don't expect another recession, they don't see growth accelerating enough to lower the unemployment rate, which was 9.1 percent in August.

A forecasting panel for the National Association for Business Economics predicts total growth for the year will be just 1.7 percent.

In January, most economists had predicted 3 to 4 percent growth for the entire year. A Social Security tax cut gave Americans an extra $1,000 to $2,000 in after-tax income. That was expected to buoy consumer spending, which fuels 70 percent of growth.

But the economy ended up being more vulnerable to shocks. Food and gas prices spiked, and those higher costs forced people to cut back on discretionary items, such as vacations, appliances and computers.

The decline in demand hurt U.S. factories, which were also affected this spring by supply chain disruptions caused by the March 11 earthquake in Japan.

Facing decreased demand for their goods and services, businesses cut back on hiring. In August, the economy didn't add any jobs — the weakest month for hiring in nearly a year.

Beth Ann Bovino, chief economist at Standard&Poor's in New York, said the likely outlook is for the unemployment rate to remain around 9 percent through the rest of this year and the first part of 2012.

President Barack Obama has proposed a $447 billion job-creation package. He wants to cut Social Security taxes for workers, extend unemployment benefits, cut taxes for small businesses and spend more federal money to build roads, bridges and other public works projects.

But the president's proposal faces opposition in Congress. Republicans object to his proposal to pay for the plan with higher taxes on wealthier households, hedge fund managers and oil companies.



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