AP News

Ahead of the Bell: US Economy-GDP


WASHINGTON (AP) — The U.S. economy is expected to keep plodding along at sub-par growth rates for the rest of this year with little improvement in the labor market.

Economists estimate the economy expanded at an annual rate of 1.7 percent in the April-June quarter, according to a survey by FactSet.

That would be unchanged for the estimate the government made last month, which had been a slight upward revision from the government's first estimate of growth at 1.5 percent in the April-June period.

The government issues three estimates each quarter for growth in the gross domestic product, the country's total output of goods and services, everything from baby diapers to roads and highways.

Growth at or below 2 percent is not enough to lower the unemployment rate, which was 8.1 percent in August. Most expect the unemployment rate to stay around 8 percent for the rest of this year because they anticipate little pickup in growth.

The consensus view is that the economy expanded in the July-September quarter at a lackluster pace of between 1.5 percent to 2 percent. They expect the final three months of the year will be about the same. For all of 2011, the economy grew 1.8 percent.

A weak economy and high unemployment could hurt President Barack Obama's re-election chances and bolster Republican nominee Mitt Romney's campaign.

The slow growth and anemic job creation prompted the Federal Reserve earlier this month to take some dramatic steps in an effort to jump-start activity.

The Fed announced it was launching a third round of bond purchases in an effort to push long-term interest rates down further to stimulate home purchases and other economic activity. The Fed said it would buy $40 billion each month in mortgage-backed securities and would keep up the purchases and possibly expand them until the job market showed significant improvement.

Opponents of the program, including some on the Fed, have argued that the effort will have little impact, given that interest rates are already so low, and could wind up causing inflation troubles down the road.

But Federal Reserve Chairman Ben Bernanke and Fed officials who voted 11-1 to launch the effort contend that it will give the economy a boost. They say that inflation is showing no signs of rising above the Fed's target of 2 percent and the economy needs help, given that unemployment has been above 8 percent since early 2009.

In a speech Wednesday, Charles Evans, head of the Fed's regional Chicago bank, said the country can't afford timid efforts in the battle against high unemployment.

"If we continue to take only modest, cautious, safe policy actions, we risk suffering a lost decade similar to that which Japan experienced in the 1990s," Evans told an audience in Hammond, Ind.


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