Obama administration downgrade US economic growth prospects

| September 2, 2011 | 0 Comments

There have been fears of late that the US economy could fall back into recession this year but the Obama administration does not envisage this and is predicting growth of 1.7% this year – albeit 1% less than its forecast earlier this year.

Official data from the Commerce Department show the economy grew by just 0.4% in the first quarter and 1% in the second.

Consumer spending has been weak over recent months and this is an area which is closely monitored as it accounts for approximately 70% of total economic output.

Furthermore, the economy continues to struggle in the face of higher unemployment and a depressed housing market.

Official data due later today is expected to show unemployment remains above the 9% mark.

White House economists believe the unemployment rate could still be as high as 9% late next year – it remains one of the key issues for the economy.

Continued high unemployment could threaten President Barack Obama’s prospects for re-election next year.

Investors are nervous about the key US jobs data and shares have fallen this morning in anticipation of the release of the figures.

London’s FTSE 100 lost 1.8% in the first two hours of trading, while Germany’s Dax was down 2.7%.

In other news this week, it was revealed US consumer confidence fell in August.

The reading from the closely-monitored Consumer Confidence Index from the Conference Board dived to 44.5 this month from July’s reading of 59.2.

The reading remains far away from the 90 points required to show that the world’s largest economy is on solid footing.

Since the index commenced in 1967, the average reading has been 95.6.

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