Slow growth leaves White House race wide open
Weak consumer spending stunted US growth in the last quarter, data showed Friday, leaving the race for the White House wide open and putting discussion about more economic stimulus firmly on the Fed’s agenda.
The Commerce Department reported second-quarter growth fell to 1.5 percent from 2.0 percent in the previous quarter, as Americans spent less on big-ticket items.
The growth rate was slightly above the level expected by economists, but not high enough to blunt concern that the recovery remains weak and vulnerable to shocks.
“The economy’s performance in the spring was better than the worst fears but not satisfactory by any gauge,” said Stephen Stanley of Pierpont Securities.
With almost 100 days left in the race to win the White House, the gross domestic product figure looked poised to reinforce the tone of the contest between President Barack Obama and his challenger Mitt Romney.
Republicans cast the data as further evidence that Obama’s economic policies have failed.
“Today’s weak GDP number is just more devastating news for struggling American families,” said Republican National Committee chairman Reince Priebus.
“Our economy is growing far too slowly, proving President Obama’s lack of focus on jobs is taking its toll.”
The White House parried Republican attacks by pointing to the “twelfth straight quarter of positive growth.”
“While the economy continues to move in the right direction, additional growth is needed to replace the jobs lost in the deep recession that began at the end of 2007,” said top Obama economic adviser Alan Krueger.
At 1.5 percent, growth is far from a knock-out blow against Obama.
Emory University professor Alan Abramowitz has devised a formula — in part based on second-quarter GDP — that has accurately predicted the result of the last five presidential elections.
“Based on 1.5 percent GDP growth, Obama is predicted to get 50.5 percent of the major party vote,” he said Friday.
“That translates into about a 2/3 probability of winning the election. Far from certain but he’s the favorite.”
Both candidates currently hold 46 percent of the vote, according to Gallup tracking polls, virtually unchanged in the last three months, despite Romney’s withering attacks being supported by weak jobs data.
The Commerce Department also published revisions of the last few years of growth data, which showed the recession was slightly weaker and the recovery patchier than first thought.
Growth in the last quarter of 2011 was revised up significantly, from 3.0 percent to 4.1 percent.
The second-quarter data and revisions are likely to pose a headache for the Federal Reserve’s top policy committee, which meets next week.
The Fed has been cautious about launching any new stimulus, preferring to wait and see whether a recent slowdown has been a blimp, or a harbinger of worse times ahead.
Analysts were split on whether the Commerce Department’s report tipped the Fed scales in either direction.
“A majority of the Committee will want to see more data and would prefer to take more time to discuss the pros and cons of the full range of policy options,” said Ellen Zentner of Nomura, a Japanese bank.