US GDP Up 1.9%

By Michael Bowman

31 July 2008

The U.S. economy continues to expand at a slow pace, according to the latest growth figures provided by the federal government.

The Commerce Department says the U.S. economy expanded at an annual rate of 1.9 percent from April through June, up from 0.9 percent in the first quarter of the year.

For a nation that has teetered perilously close to a recession for nearly a year, the uptick in economic activity is welcome. But economist Desmond Lachman, a resident scholar at the Washington-based American Enterprise Institute, sees the gross domestic product figure as disappointing given federal attempts to stimulate the economy, including billions of dollars in tax rebate checks sent out earlier this year.

"What one had expected was that the economy would get some boost from a tax rebate program. The numbers on consumer spending show that consumption did, indeed, grow, but it only grew at 1.5 percent," he said. "And the question is: what happens now, once the tax rebate begins to fade?"

The Commerce Department also revised downward previous growth estimates from the final quarter of last year, saying the economy actually contracted slightly, by 0.2 percent on an annual basis.

Lachman says the U.S. economy is confronting the most challenging conditions seen in decades, and that Americans should consider themselves fortunate that the nation has yet to slip into a full-blown recession.

"The headwinds faced by the U.S. economy are enormous. Not only do we have an oil price shock, but there is a housing market bust that has no parallel in the last 70 years. And there is a credit crunch that [former Federal Reserve Chairman] Alan Greenspan himself describes as the most wrenching crunch this nation has had in the post-war period. This does look like a perfect economic storm, and we certainly should be grateful that the economy has held up," he said.

Earlier this week, the White House released projections of massive federal deficits for this year as well as 2009. Economists say the budgetary crunch will give the current administration, as well as the next president, limited leeway to further stimulate the economy.

One bright spot on the economic landscape: U.S. exports are booming amid a weak dollar that makes American products cheaper abroad. U.S. exports grew at a 9.2 percent pace in the second quarter, following a 5.1 percent rise in the first three months of the year.