US recovery gets a downgrade

 
The White House The White House will be hoping the GDP figures help to focus minds in Congress

The White House will see a silver lining in today's grim GDP figures, if they help to remind the negotiators on Capitol Hill of the fragility of the US recovery.

The first estimate for growth in the second quarter shows that the US needs a crisis over financing the basic functions of government like a proverbial hole in the head.

But the most shocking thing about today's release was not the headline figure for the second quarter, which showed annualised growth of 1.3%, well below the consensus of around 1.8%.

No, the shock came in the revised version of the recovery before that. The economy is now thought to have grown just 0.4% annualised in the first three months of 2011. We had thought that GDP grew by 1.9% in Q1.

Translating those figures into the quarterly numbers the rest of the world use, that means the US grew by just 0.1% in the first quarter, and by 0.3% in the three months after that, an even worse performance over the first 6 months of 2011 than the UK. (Though the US grew nearly twice as fast as Britain in 2010.)

The official assessment of America's great recession has also changed, with the economy now thought to have shrunk by 5.1% over the course of the downturn, not 4.1% as previously thought.

The significance of that change is that the US cannot now be said to have got back to where it was before the recession hit in 2007, unlike Germany and France.

In the US recently, it has become commonplace to cite the UK as a cautionary tale: a demonstration of the economic costs of cutting spending early in the recovery.

Even the Wall Street Journal had a story on the UK GDP figures this week, headlined "UK Pays Growth Price for AAA Rating".

Critics of the chancellor would happily agree with that US version of events, but Mr Osborne might be tempted to ask, if he's to blame for Britain's feeble recovery how do you explain America's?

 
Stephanie Flanders Article written by Stephanie Flanders Stephanie Flanders Former economics editor

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After 11 years at the BBC, I'm leaving for a new role in the City.

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  • rate this
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    Comment number 448.

    GingerS @444 mrsbloggs @345-7
    Not to 'please always' but to ensure fairness!

    If FREE people elect a REPRESENTATIVE assembly to suggest options / take decisions that MUST be collective, then the MAJORITY will fairly determine.
    DEMOCRACY will thereby WORK, "as best it can", UNLESS a decision be suggested that DESTROYS democracy by taking away BASIC RIGHTS - electoral & economic voting EQUALITY

  • rate this
    0

    Comment number 447.

    444
    In my one elected role, it proved absolutely impossible to please all of the people. In fact on any given issue you could offend or displease almost anyone. So my approach was to do what I considered to be the best thing for the most people. As I only had one vote in my assembly, I might not get a result I approved of but that's the outcome of majority decision making.

  • rate this
    0

    Comment number 446.

    Actually, we might benefit from a bit of nothing being done, for a while

  • rate this
    0

    Comment number 445.

    The previous 'regime' had tried to do things by 'consensus'. NOTHING got done for years and there was no money to do what needed to be done.

  • rate this
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    Comment number 444.

    443.All for All
    But then doesn't a democracy work by the rule of the majority, surely that's what voting is all about?
    All I'm saying is there's no point representing the minority as that wouldn't be good for most, like they seem to do now.
    You can please some people sometimes but you hcan't please all the people all the time. So do the best you can.

  • rate this
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    Comment number 443.

    GingerSpam @420
    Democracy to do better!

    Better than 'rule by majority' - dictatorship, unless…

    Better than rule 'for good of' the majority - dictatorship unless…

    Enduring democracy guarantees 'the good of all', in equal freedom.

    One exception? 'Blue-sky' conscientious objectors, after a period, less paid.

    90% of fate shaped by history & society - no deal better than with conscience

  • rate this
    0

    Comment number 442.

    GingerSpam @420
    Democracy must do better!

    Better than 'rule by the majority' - dictatorship, unless...

    Better than 'rule for the good of the majority' - dictatorship unless…

    Enduring democracy guarantees 'the good' of all in equal freedom

    One exception? 'Blue-sky' conscientious objectors, after a period less paid

    90% of fate shaped by history & society - no deal better than with conscience

  • rate this
    0

    Comment number 441.

    mrsbloggs @437-438
    Think I'm on your 'side'!

    Not sure EMERGENCE grasped

    Of course, however 'representative' GOOD leads must be SENSIBLE!

    Neither "we" nor "Leaders" (MPs, bus-drivers, surgeons, investors) ever perfect

    Perfect "Health Outcome" might be considered impossible... but factor-in freedom

    Without democratic freedom, of SICKNESS no doubt!

    Not subtle / mistasken, but brutal horror

  • rate this
    0

    Comment number 440.

    That _Ian @430
    Agreed on Lobbying - and first Cause?

    Remember: "Give a man a fish, you feed his family that day. Teach a man to fish and you set him free!"

    How many causes have you wished you had time to take-up - in time / money?

    Not to be defeatist, the answer is to set all free, including our leaders, to function and to represent.

    That means income-share equality.

  • rate this
    0

    Comment number 439.

    Chris London @413
    Missing exclamation?

    Like to hope remark on Unions intended to be funny - to someone?

    Many if not most MPs & Union 'representatives' doubtless very worthy & very hard-working - some I know of outstanding human wisdom

    BUT - thought I could be sure you took the point - REPRESENTATIVENESS does not come with a Seat or a Union badge!

    Crucially, with same-world equal income.

  • rate this
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    Comment number 438.

    And I say when it wasn't needed because although we now spend twice what we did on the NHS, I'm not sure whether we get twice the health care. we spend twice what we did on education too and a variety of other things.

    I can't spend twice what I did in 1997. Can you? In fact government couldn't either, we just didn't know it.

  • rate this
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    Comment number 437.

    #409

    Yes there could be a disaster of some kind or another
    That's why we shouldn't be spending on the credit card when there isn't one
    And perhaps, all though it might seem as though we are down on luck, perhaps we aren't. Perhaps we were fooled into thinking things were better than they actually were by credit card spending when it wasn't needed

  • rate this
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    Comment number 436.

    That_Ian - this is the link to their main site I believe.

    http://www.citizensuk.org/ - it might not appeal to any aversion to mass demos though but don't that put you off;)

  • rate this
    0

    Comment number 435.

    428.United Dreamer

    Well, I understand it all started there as a grassroot movement and then got hijacked a bit.

    I think it is safe to say that if presented with a real option not to be re-elected politicians will follow the wishes of the mass ahead of corporations. Of course, after that the corporations will latch on to the movement too...

  • rate this
    0

    Comment number 434.

    "430. That_Ian

    423.United Dreamer

    That is probably the most constructive comment I have ever seen on this blog!

    Completely agree!

    Telco - was it?"

    Aye.

  • rate this
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    Comment number 433.

    The other area that I'm looking at investigating is credit unions - they have the immediacy of investing in your locale if only on a small scale. One thing is for certain though. The return on mainstream avenues of investment and savings have been pared to the bone. So maybe we should thank the banksters for that;)

  • rate this
    0

    Comment number 432.

    Contd - The question is WHY are the media doing this?

  • rate this
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    Comment number 431.

    "413. Chris London
    32 MINUTES AGO
    398.All for All
    Representatives

    Weren't these Unions and look how they went."

    Unions in the main have been good for the vast majority of people in this country. Its what has protected the working man for over a hundred years. At times the power of the union rep is overused but that doesn't mean unions are bad. It means the media are manipulating the facts.

  • rate this
    0

    Comment number 430.

    423.United Dreamer

    That is probably the most constructive comment I have ever seen on this blog!

    Completely agree!

    Telco - was it?

  • rate this
    0

    Comment number 429.

    Chris London @408
    Good thinking!

    Fit for purpose - democratic, even if to evolve with experience?

    Not dictatorial - freedom with income security, not least in job-change!

    Opt out - caution - SOME 'slack', subsist-plus, 'conscientious blue-sky'?

    Borrowing - bow to an Economist, but should this mean NEVER @409?

    Perhaps follow Sharia - lend for SHARES not 'guaranteed' INTEREST?

 

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