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Economic growth slower in the spring, agency reports
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WASHINGTON - The prospects for a quick economic recovery dimmed Thursday, with new data showing the economy grew at a slower-than-expected rate this spring despite some oomph from tax rebate checks — and actually shrank late last year.
Democrats called for a second economic stimulus package, while the Bush administration said the growth was proof the checks helped.
Armed with government stimulus checks of up to $600 per person, Americans boosted spending on food, clothing and other items in the second quarter, the Commerce Department reported.
But the gross domestic product still increased at a 1.9 percent annual rate, up from 0.9 percent in the first quarter but less than the 2.4 percent economists were looking for.
Government revisions showed the economy actually shrank at the end of last year at a 0.2 percent annual rate. It was the first quarterly dip for the GDP since the 2001 recession.
Meanwhile, the Labor Department said the number of newly laid-off people rose to 448,000 last week, the most in five years. More job cuts are expected in coming months, and Americans may cut back on spending, kindling recession fears.
Wall Street didn’t like what it saw. Following two days of gains, the Dow Jones industrials fell 205.67 points to 11378.02.
President Bush acknowledged the economic news was “not as good as we’d like it to be.” His commerce secretary, Carlos Gutierrez, said the growth showed the stimulus package was providing some relief.
“Some said the rebates would not have an impact. Well, they were wrong,” Gutierrez told The Associated Press. “The stimulus checks are having an impact in spite of the energy prices.”
On the campaign trail, the economic policy director for Democratic Sen. Barack Obama said nothing in the new numbers was “positive for families” and said Obama supported a second stimulus package.
Republican Sen. John McCain said the report was disappointing but added that trade “provides one of the few bright spots in an otherwise gloomy economic picture.”
Sales of U.S. exports grew at a 9.2 percent pace in the second quarter, up from 5.1 percent in the first quarter. The weak dollar has made U.S. goods cheaper to foreign buyers.
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