The steady increase in unemployment over the past few months slowed the US economy’s gross domestic product (GDP) to 1.5% in its latest report issued Friday, July 27. Former projections for economic growth had placed GDP at 2% but the slowdown in consumer spending brought on by employment fears took its toll, stalling the economy to its slowest growth rate in over a year.
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The two culprits—the European debt situation and Congressional limbo over the fiscal cliff in the US—have made some progress toward resolution but not nearly enough. The Federal Open Market Committee (FOMC) meets this week on July 31 and August 1 to decide if further easing action is needed to boost growth.
Analysts are predicting the economy will pick up a bit of steam in the second half
of the year, although no one is expecting anything more than a moderate expansion for the near future. Key factors for increasing growth are low gasoline prices and signals from European Central Bank president Mario Draghi that Europe is willing to do whatever it takes to get Europe out of its current malaise.
Estimates for second quarter US GDP growth were 1.4%. Household consumption grew at a rate of 1.5%, which was down from 2.4% in the first quarter of the year.
The Congressional Budget Office (CBO) also released revisions of GDP growth as far back as 2009, showing that growth immediately after the 2008 crisis was even slower than previously thought. The last quarter of 2011 put growth at 4.1%, the best rate in almost six years. This rate was revised upward from 3% reported previously for the fourth quarter 2011.