Debt debacle damage could mean double-dip
Gridlocked government appears powerless to revive growth
msnbc.com
July 29, 2011
NEW YORK — Washington's spectacular failure to manage the nation's finances has raised concerns that a gridlocked government is also powerless to revive a slowing economy.
The latest economic data raised fresh fears that recovery could soon turn back into recession. The nation's gross domestic product, the broadest measure of the economy, rose at an anemic 1.3 percent annual rate in the second quarter, the Commerce Department said Friday.
Revisions to first-quarter data were more alarming. The government now says the economy grew just 0.4 percent in the first three months of the year, not the 1.9 percent gain logged in its previous report.
"Everybody expected GDP to be weak for the second quarter," said Tim Ghriskey, chief investment officer of Solaris Asset Management. "But this is a pretty shockingly low number. The revision to the first quarter is even more shocking."
Story: US economy slowed to snail's pace in second quarter
Much of the second-quarter weakness came from a sharp slowdown in consumer spending, which rose just 0.1 percent in the second quarter after rising 2.1 percent in the first three months of the year.
Consumers have had plenty of reasons to pull back this year: Job prospects are grim, wages have barely budged and a surge in gasoline prices took a big bite out of their household budgets.
Consumer sentiment continues to worsen. A widely followed index released Friday fell in July to its lowest point in more than two years. The ongoing spectacle of dysfunctional government isn't helping, according to Richard Curtin, director of the Thomson Reuters/University of Michigan consumer sentiment index.
"While consumers may not fully understand the debate about the federal debt, they do understand the meaning of the oft-repeated warnings of 'dire economic consequences,"' he said.
Full story: http://www.msnbc.msn.com/id/43944564/ns/business-eye_on_the_economy/
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