Hopes of US recovery falter as growth slows

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The Independent Online
HOPES OF a sustained economic recovery in the United States were dented once again yesterday on reports that growth in gross domestic product fell back to just 1.4 per cent in the second quarter.

The disappointing performance will reinforce fears that the recovery, almost convincing at the start of the year, is faltering and could conceivably stop completely. The depressed growth reflected reports earlier this week of a further collapse of consumer confidence in July.

On the brighter side, though, weak growth has helped depress inflation, which, according to statistics also released yesterday, stands at an annual rate of 1.6 per cent, lowest for a decade.

Commerce Department figures yesterday showed an important jump of 7.9 per cent in single-family home sales across the US. There has also been a string of encouraging corporate results over recent days, notably in the car sector, although analysts say renewed profits are usually more the result of restructuring than real increases in sales.

The 1.4 per cent growth rate is less than half the 2.9 per cent reported for the first quarter of the year, and below what most economic experts - and the White House itself - had been predicting. Most important, it is not enough to bring any real hope of a reduction in the unemployment rate, which recently reached an eight-year high of 7.8 per cent.

The continuing weakness of the economy has inevitably become a battleground of the presidential election campaign, and yesterday's news will deepen alarm in the White House. The administration has continually put a brave face on the economic situation and promised recovery soon. Its declared growth target for 1992 is a modest 2.7 per cent. Even for that to be reached, growth in the third and fourth quarters must average 3.2 per cent.