Recovery loses speed as consumers turn cautious
By JEANNINE AVERSA, AP on Yahoo! News
WASHINGTON – The recovery lost momentum in the spring as growth slowed to a 2.4 percent pace, its most sluggish showing in nearly a year and too weak to drive down unemployment.
Consumers spent less, companies slowed their restocking of shelves and the nation’s trade deficit dragged more on the economy in the April-to-June quarter. In a separate report, the Commerce Department said the recession was deeper than previously estimated.
Together, the reports raise doubts about whether employers will hire enough and consumers will spend enough to invigorate the economy. As unemployment remains near double digits, Congress could feel pressure to pass more stimulus measures to speed the recovery. So far, Republicans and some Democrats have blocked additional spending because of their concerns about the size of the deficit.
Investors reacted to the report with disappointment. Stock futures fell in the hour before the markets opened. However, losses moderated in morning trading after the University of Michigan/Reuters consumer sentiment index for July rose slightly more than expected.
The Commerce Department report released Friday did offer some encouraging news. Businesses invested the most in 13 years on equipment and software during the second quarter. For the first time in two years, builders boosted spending on commercial projects. And home builders spent the most in 27 years, although many expect that to fade now that government homebuying tax credits have expired.
The report also showed that the economy grew at a 3.7 percent pace in the first three months of this year. That was much better than the 2.7 percent pace estimated just a month ago.
Still, the recovery has been losing power for two straight quarters. That raises concerns about whether it will fizzle out. Or worse, tip back into a “double-dip” recession.
Tags: Economy, Recovery, ARRA, Bailouts, Obama, Stimulus, Markets, Recession, Double-Dip
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