U.S. Growth Slows Sharply to 2.2% in Q1

April 27, 2012
Official data rekindle fears of a fresh stumble in the recovery.

U.S. economic growth slowed sharply to 2.2% in the first quarter, official data showed Friday, rekindling fears of a fresh stumble and framing the first steps of the presidential race.

The broadest gauge of the world's largest economy, Friday's figure gave economists, policymakers and investors a sense that the recovery is airborne, but losing altitude.

Gross domestic product (GDP) growth had hit 3% in the final quarter of 2011.

The drop from January to March was largely thanks to a slump in government spending. That alone shaved 0.6 points of GDP.

"The U.S. economy is clearly expanding, but just as clearly it's expanding at a rate that is too slow to put reliable, significant downward pressure on joblessness," said Josh Bivens of the Economic Policy Institute.

U.S. unemployment currently stands at 8.2%.

Ahead of the data, weak orders for long-lasting goods and a jump in shipping sent mixed messages.

Economists' predictions about the figure had been as mixed as their views about the recovery itself.

Macroeconomic Advisors, which runs one of the most widely respected economic models, predicted that growth was close to 3.2% in the quarter.

Meanwhile, the Wall Street consensus had been for 2.5% growth.

Released just as an economy-soaked battle for the presidency is joined, the GDP data is a setback for President Obama.

Six months until the election, he is still trying to overcome voters' dogged gloominess about all things economic.

Half of all U.S. voters say the economy will be the single biggest issue in the election. One recent poll showed over 80% believe the country is still in recession.

The recession officially ended nearly two years ago, in June 2009.

The White House heralded the "11th straight quarter of positive growth," but admitted growth was not strong enough.

"While the continued expansion of the economy is encouraging, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007," said Alan Krueger Chairman of the Council of Economic Advisers.

"The latest report continues a pattern of moderate growth in the private-sector components of GDP and contraction of the government components of GDP."

Against this backdrop Obama will hold the first proper political rallies of his reelection bid in early May.

Meanwhile, Romney's camp came out swinging.

"This news further demonstrates that President Obama's policies have hindered our economic growth and prevented a sustainable, job-creating recovery from taking hold," said spokeswoman Andrea Saul.

But the economic data alone will not decide who wins the White House in November.

In the past, GDP growth has been an awful gauge of electoral fortunes. Dwight Eisenhower won reelection by a landslide with 2% growth, while Richard Nixon turfed out the Democrats with growth close to 5%.

The Commerce Department figures are annualized and incomplete. They are often subject to substantial revision.

Copyright Agence France-Presse, 2012

See Also:

U.S. Manufacturing is on Track to Outperform Overall GDP Through 2013

Business Economists Upbeat on Rising Sales, Profit Margins

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Agence France-Presse

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