new data shows sharp slowdown in growth rate

NYTimes | The economy slowed to a snail’s pace in the first half of 2011, underscoring a growing risk that the recovery itself may hang in the balance with budget and debt decisions in Washington.

The broadest measure of the economy, known as the gross domestic product, grew at an annual rate of less than 1 percent in the first half of 2011, the Commerce Department reported on Friday. The figures for the first quarter and the second quarter, 0.4 percent and 1.3 percent respectively, were well below what economists were expecting, and signified a sharp slowdown from the early months of the recovery.

The government also revised data going all the way back to 2003 that showed the recession was deeper, and the recovery weaker, than initially believed.

“There’s nothing that you can look at here that is signaling some revival in growth in the second half of the year, and in fact we may see another catastrophically weak quarter next quarter if things go wrong next week,” said Nigel Gault, chief United States economist at IHS Global Insight, referring to the debt ceiling talks.

With so little growth, the economy can hardly withstand further shocks from home or abroad, and worrisome signals continue to emanate from heavily indebted European countries.

If the domestic economy were to contract, any new recession would originate on President Obama’s watch — unlike the last one, which began a year before he was elected.

If Congress leaves existing budget plans intact, some of the government’s economic assistance, like the payroll tax cut, will phase out and thereby act as a drag on growth.

And by many economists’ thinking, whatever additional budget cuts Congress eventually agrees to (or does not) will weaken the economy even further.