US economic growth is revised down to 1.6%
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US economic growth is revised down to 1.6%

Williamsburg : VA : USA | Aug 28, 2010 at 2:53 AM PDT
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Bailout American Style

The US economy grew 1.6% in the second quarter, revised down from a first estimate of 2.4%.

The figures were better than most analysts had expected.

Recent data on the US economy had raised worries that the US was entering a double-dip recession, dragging the rest of the world with it.

The revised figure was mostly due to the largest surge in imports in 26 years, and a slower build-up of stocks by companies.

Economists had estimated the revision would be sharper for the April-to-June period, down to about 1.3%.

Nevertheless, it still marks a big drop on the growth figure for the previous three months, which stood at 3.7%.

The US economy has now grown for four straight quarters, although that annualised growth rate averaged only 2.9%.

Experts say that the economy needs to grow at about 3% just to keep the unemployment rate, currently 9.5%, from rising.

Business investment in new machinery, computers and software drove much of the growth last quarter, increasing nearly 25%.

Import surge

But much of that spending involved the purchase of imported goods. Imports surged 32.4%, the most since 1984. That was much larger than the 9.1% increase in exports.

However, the Commerce Department figures also showed that personal consumption by US consumers was higher than expected.

Their spending rose at a 2% annual rate, slightly higher than the first quarter's 1.9%.

In the past week, economic data has revealed deep concerns about the health of the US economy.

Sales of new homes sank to the lowest levels in half a century, while the manufacturing sector cut back capital spending sharply.

On Friday, in a speech to central bankers, Ben Bernanke, chairman of the Federal Reserve, warned that the economic outlook was "inherently uncertain". The economy, he said, "remains vulnerable to unexpected developments".

He also said that the Fed was ready to pump more money into the economy, through another large-scale purchase of securities, if conditions were to deteriorate significantly.

The US economy emerged from recession with a 1.6% growth rate in the third quarter of 2009.

Here are a selection of your comments:

For a country that spends 53% of its budget on defence it is no surprise. As for the TARP bailout any fool could see that handing billions of dollars to the banks only served to prop up the profits and bonuses of the banks and Wall Street, while main street sank into depression. Throwing good money after bad only served to hide the real truth of how severe the economy was in 2008, for the world and not just the US. Now comes the real depression that has only been stalled for two years.

It is no surprise that the number of millionaires and billionaires rose in those two years and the bailout was the biggest mass transfer of wealth from poor to rich in the history of mankind. Bernanke now has his hands tied. The Fed cannot keep printing more money because of the risk of hyper inflation and they cannot lower interest rates that are at zero. Ironically for the US their war chest is empty and I bet many are wondering if the war on terror has ultimately been a failure as the US empire sits on the precipice of collapse. The only thing now is who do they drag down with them?

Paul, Stirling, UK

The astonishing aspect of this is the currency exchange rate. The dollar is overvalued compared to other currencies but seems impervious to change, irrespective of market indicators suggesting that the dollar should be of lower value. Or that it should react proportionately to market indicators.

Tom McKinlay, West Palm Beach, USA

It is a wonderful thought to think that the US economy is growing. I am sure that these growth numbers are calculated as they have been, or as they are supposed to be. Just the same, I don't buy it.

I live in a rather "well to do" area. Plenty of folks come here to retire. Many well paid professionals commute up to 90 minutes each way to work just for the privilege and ability to call Williamsburg their home. For almost a decade I have observed bright young Eastern European students shipped in by the truck load each summer to meet the local work force demand of the many upscale historical tourist attractions, museums, and a few large theme parks.

They are shipped out in the fall. Time Shares have thrived here. There are hundreds if not thousands of hotels, restaurants, and pricey trend setting boutiques. But over the last year I have noticed things are starting to change. The local newspaper is turning into a large venue of scattered advertisements sprinkled with articles on local events and the like. The higher end shopping malls have plenty of available space. Office parks are literally deserted. Wal-Mart is packed.

By 11pm the Williamsburg area is dead. I fear what bland view the months of winter will bring. This may not sound so bad compared to the rest of the American economy. Admittedly there is still a lot of "old money" here in my home town of Williamsburg. But the thing that scares me is that there is no doubt that Williamsburg is comparatively thriving to other US communities. From my perspective of the Williamsburg community, we are not thriving, rather slowly dying. It is scary.

Roman, Williamsburg, Virginia, USA

We are still suffering from the financial mismanagement, economic devastation and warmongering bought on by the Bush years. Those eight years of total incompetence has cost the US and the world dearly.

Roger S Clarke, Charlotte, North Carolina, USA

I believe after a careful look at the last four quarters, things are going to be ok with another constant push. The US economy is like a heavy truck that takes time to gather speed. Equally, it takes time to make a complete stop. The US should therefore really concentrate on the import and export data especially as it has both the means and power to do so.

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Ben Bernanke is expected to win approval for a second term
Ben Bernanke is expected to win approval for a second term
Aun Muhammad is based in Lahore, Punjab, Pakistan, and is an Anchor for Allvoices.
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