The economy grew 1.3% in the second quarter, according to Commerce Department figures released Friday. The pace was below private-sector expectations of 1.8% growth. Compounding the disappointing numbers, first-quarter GDP growth was revised down sharply from 1.9% to 0.4%.
In related news, Bloomberg reports a “black Turkey” has flown from the debt and deficit negotiations. Similar to a “black swan,” a euphemism used by financial experts to describe an unforeseen market event that positively or negatively affects investor behavior, a “black turkey” is an event that investors see coming, yet nonetheless they do not act.
On the size of the economy, prior-years’ GDP growth was also revised downward, most notably for 2009, where it was 0.9% lower than initially recorded, indicating that the recession was even more severe than originally estimated.
“Today’s first look at GDP in the second quarter confirms what we already knew: The economy isn’t growing as fast as it needs to,” U.S. Commerce Secretary Gary Locke said in a statement. “And every day that we fail to act to lift the debt ceiling and inch closer to default, we threaten our economic progress and job creation.”
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Charlie Farrell, principal with Denver-based North Star Investment Advisors, agreed and added that the situation in the small business sector is largely to blame.
“Credit and financing for small businesses remain dismal,” Farrell said. “Fully 70% of GDP comes from consumer spending, but consumers don’t have new jobs, so they’re not spending.”
He noted banks are still dealing with the after-effects of the economic downturn and addressing new regulation. As a consequence, they’re not lending to small businesses in order to help them launch or expand.