US growth at 1.9 percent in second quarter

August 1st, 2008 - 9:57 am ICT by IANS  

Washington, Aug 1 (DPA) The US economy grew at 1.9 percent in the second quarter of 2008, the government said Thursday, shaking off an ongoing credit and housing crisis that had some predicting a recession in the first half of the year. The gross domestic product (GDP) figure was up from a revised 0.9 percent in the first quarter, but less than the 2.3 percent economists had predicted for the world’s largest economy, according to Bloomberg financial news.

In a surprising announcement, the Bureau of Economic Analysis (BEA) also revised 2007’s fourth-quarter GDP figures down to a 0.2- percent contraction from an earlier estimated growth rate of 0.6 percent.

That revision could spark new talk of a recession over the 2007- 2008 period. First-quarter 2008 growth was revised down slightly to 0.9 percent from 1 percent. A recession is typically defined as two straight contracting quarters.

The stronger second-quarter growth in part due to a series of tax rebates issued to US consumers beginning in May as part of a $170- billion economic stimulus package passed by Congress. Consumer spending was up 1.5 percent over the period.

The BEA in its advance estimate also attributed the improvement to strong exports, decreasing imports and higher government spending.

President George W Bush called the second-quarter figures “encouraging news” that showed the stimulus package was having a positive effect on the economy.

“It’s not as good as we’d like it to be, but I want to remind you a few months ago there were predictions that the economy would shrink this quarter, not grow,” Bush said in a speech in West Virginia.

Residential fixed investment, or housing, continued to weigh heavily on growth, plunging 15.6 percent on the quarter as the credit crisis continues to threaten many Americans with foreclosure, the BEA said.

Bush Wednesday signed a massive housing rescue package that would allow about 400,000 struggling homeowners to refinance into low-interest government loans and provides tax incentives to first- time home buyers.

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