NEW YORK (AP) -
The U.S. economy grew at an even more
sluggish pace in the April-June quarter than previously believed as farm
production in the Midwest was reduced by a severe drought.
The overall economy grew at
an annual rate of 1.3 percent in the spring, down from its previous
estimate of 1.7 percent growth, the Commerce Department said Thursday.
The big revision reflected that the government slashed its estimate of
crop production by $12 billion.
About half of the downward
revision to growth came from the decline in farm inventories. But other
areas were weaker as well including slower consumer spending and less
growth in exports.
The 1.3 percent growth in
the spring followed a sluggish 2 percent growth rate in the first
quarter, rates too slow to lower unemployment. The unemployment rate was
8.1 percent in August. Most expect it to stay around 8 percent for the
rest of this year because they anticipate little pickup in growth.
Before Thursday's revision
in the April-June figures, the consensus view was that the economy
expanded in the July-September quarter at a lackluster pace of between
1.5 percent to 2 percent. They expected the final three months of the
year will be about the same. For all of 2011, the economy grew 1.8
percent.
A weak economy and high
unemployment could hurt President Barack Obama's re-election chances and
bolster Republican nominee Mitt Romney's campaign.
The slow growth and anemic
job creation prompted the Federal Reserve earlier this month to take
some dramatic steps in an effort to jump-start activity.
The Fed announced it was
launching a third round of bond purchases in an effort to push long-term
interest rates down further to stimulate home purchases and other
economic activity. The Fed said it would buy $40 billion each month in
mortgage-backed securities and would keep up the purchases and possibly
expand them until the job market showed significant improvement.
Opponents of the program,
including some on the Fed, have argued that the effort will have little
impact, given that interest rates are already so low, and could wind up
causing inflation troubles down the road.
