Double-dip feared as US economic growth loses pace
Fears that the world’s biggest economy could be heading into a double-dip recession took hold on Friday after US growth was shown to have contracted sharply in the second quarter.
By James Quinn
30 Jul 2010
The Dow Jones Industrial Average fell by as much as 120 points after annualised growth in gross domestic product (GDP) was found to have slowed from 3.7pc in the first quarter to 2.4pc in the second. That came on the back of growth of 5pc in the final three months of 2009.
The US was initially thought to have grown by 2.7pc in the first quarter but that was revised upwards on a day of surprises for economists.
The US Commerce Department also revised downwards GDP figures all the way back to the beginning of 2007.
The second-quarter slowdown led economists to question whether the US might be poised to enter a period of negative growth later in the year, leading to a much-feared double-dip recession. The Dow Jones fell sharply after the release of the GDP data before recovering ground to settle down 40.72 at 10,426.44 in lunchtime trading.
“The post-recession rebound is history,” said Bart van Ark, chief economist for the Conference Board, an economic think-tank.
Economists had predicted second-quarter growth of 2.5pc, but their disappointment was compounded by the revised data for the first three months of 2010.