Capital Gold Group Report: GDP Slows in Second Quarter to 2.4% Rate – New Data Shows Deeper Recession

By Greg Robb

July 30, 2010, 10:44 a.m. EDT

WASHINGTON (MarketWatch) — The U.S. economy lost momentum in the second
quarter of the year, according to figures released Friday, which may
raise concerns of an extended soft patch if not an outright contraction.

Real gross domestic product — the inflation-adjusted, seasonally
adjusted value of all goods and services produced in the United States
– rose at a 2.4% annualized rate in the second quarter, well below the
average 4.4% increase over the last six months.

The 2.4% increase in GDP was close to the 2.5% expansion expected by
economists surveyed by MarketWatch. However, the rate of expansion in
the first quarter was revised up to a 3.7% rise compared with the prior
estimate of a 2.7% increase. Read full government release.

Economists believe that the growth was fairly strong in April and May
but hit a rough patch in June. So the economy is going into the second
half of the year with little momentum.

“The post-recession rebound is history,” said Bart van Ark, chief economist at the Conference Board.

“We don’t foresee a double dip,” he continued, “but we do expect growth
to slow even more markedly” — to what he pegged as a 1.6% annualized
rate for the second half of the year.  

Investors initially reacted negatively to the report, with losses
deepening in futures on the Dow Jones Industrial Average after the data
were released.  

Bond investors, confident the coast remains clear as far as inflation
goes, bought U.S. Treasurys as two-year note yields sank to record lows. 

Annual revisions released at the same time as the first estimate for
second-quarter GDP show that the Great Recession was deeper than
previously thought.

During the recession, real GDP decreased at a 2.8% average rate, down from the prior estimate of a 2.5% rate.

At the same time, the recovery, already one of the slowest, has been a
bit slower. From the third quarter of 2009 to the first quarter, the
economy grew at a 3.4% annual average rate, just below previous estimate
of a 3.5% increase.

Although the increase in GDP in the quarter was not as strong as the
first quarter, many of the details of the report were positive. Much of
the deceleration was due to the trade sector. Consumer spending was only
slightly weaker than the first quarter.

Now that the revisions have been released, the National Bureau of
Economic Research may move to make a formal call on the end of the
recession. Most economists think the recession ended in June 2009.

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