Fresh fears over US recovery

Jane Padgham12 April 2012

AMERICA'S plunge into recession last year started earlier, lasted longer and was far deeper than previously thought, latest figures show. Signalling that the world's biggest economy is still struggling to recover, it expanded by half the rate expected during the second quarter of this year. The news heightened fears about the outlook for all the world's economies.

US gross domestic product rose by an annualised 1.1% (equivalent to about 0.3% quarter-on-quarter) between April and June, half the 2.2% pencilled in by Wall Street economists. The slowdown from the previous quarter's 5% was driven by a collapse in consumer spending.

More dramatic were huge revisions to historic data showing the economy shrank during the first, second and third quarters of last year, plunging America into a severe recession. Earlier figures had shown the economy avoiding two consecutive quarterly contractions and therefore a technical recession.

According to the new calculations, GDP fell by 0.6% in the first quarter, 1.6% in the second and 0.3% in the third. Economists said the revisions could lead to a reassessment of the trend rate of growth of the economy, with serious implications for interest rates. They said the Federal Reserve, the US central bank, may have to push them higher than expected when they eventually move up.

'It confirms that this recession in 2001 was not particularly mild or as short as some folks had thought,'said Mark Vitner, senior economist at Wachovia Securities in Charlotte, North Carolina. 'That helps explain why we're having so much difficulty generating positive momentum right now. This report raises the odds of a double-dip recession.'

David Wyss, chief economist at Standard & Poor's in New York, said: 'The recession actually started earlier than we thought and ended earlier as well. So 11 September may not have had the kind of negative impact we thought.'

Create a FREE account to continue reading

eros

Registration is a free and easy way to support our journalism.

Join our community where you can: comment on stories; sign up to newsletters; enter competitions and access content on our app.

Your email address

Must be at least 6 characters, include an upper and lower case character and a number

You must be at least 18 years old to create an account

* Required fields

Already have an account? SIGN IN

By clicking Create Account you confirm that your data has been entered correctly and you have read and agree to our Terms of use , Cookie policy and Privacy policy .

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged in