GDP Growth Down to 1.6%
World News 10:29 AM
The Commerce Department on Friday downgraded the nation's economic growth in the second quarter.
The GDP(Gross Domestic Product) rate of 1.6% was down from last month's estimate of 2.4%. This Decline was slightly less than many economists had predicted. The report has raised fears of another recession.
In addition, more than a third (36 percent) of the growth in the second quarter came from a 27 percent surge in residential investment driven primarily by the end of the homebuyer tax credit in April. This signals that the underlying strength of the economy is even less than today’s already-anemic report shows. Today’s revised reports show no significant changes in the manufacturing numbers.
The downward revision of second-quarter economic activity came as other forecasts projected slow growth.
The central bank this year had begun pulling back its extraordinary support for the financial system, but jumped back into the bond market this month because Fed policymakers said the recovery "appeared more modest in the near term than had been anticipated."
Bernanke said Friday that the central bank could decide to expand its purchases of long-term securities, signaling low interest rates will last much longer, or lower the interest rate the Fed pays to commercial banks for their reserves, which would encourage them to lend the money.
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