The economy's spring rebound turned out to be slightly less energetic than the government previously thought. And, the road ahead is likely to be rocky as the US gets pounded by the worst financial crisis in decades. The Commerce Department reported Friday that gross domestic product, or GDP, increased at a 2.8 percent annual rate in the April-June period. That wasn't as strong as the 3.3 percent growth estimate made a month ago. But it did mark a pickup after two terrible quarters. The economy barely grew in the first quarter - advancing at a feeble 0.9 percent pace. And, in the final quarter of last year, the economy actually shrank. Nonetheless, the lower reading for second-quarter GDP surprised economists who had been expecting the government to stick with the 3.3 percent growth estimate. The main reasons behind the downgrade: consumer spending and US exports didn't grow as much during the spring as previously thought. Yet export growth was still very brisk, a key factor keeping the economy afloat. And, consumers were helped out by the government's tax rebates. GDP measures the value of all goods and services produced within the US and is the best barometer of the country's economic health. Since the spring, the economy has lost traction. In the past week alone, the clogging of the nation's credit arteries had become so bad that the Bush administration proposed a $700 billion financial bailout to Congress in a desperate bid to stem the fallout. Despite marathon negotiations between congressional leaders and the administration to hash out a deal, the package is in limbo. Angry Republicans are balking even as President George W. Bush made a fresh appeal on Friday to move swiftly. “There is no disagreement that something substantial must be done.” Federal Reserve Chairman Ben Bernanke earlier this week told Congress that failing to enact the bailout could drive unemployment and foreclosures even higher and push the economy into a recession. The economy already is faltering. It will lose momentum during the second half of this year, Bernanke told lawmakers. Consumers have clamped down and slowdowns overseas are sapping demand for US exports, he said. Businesses in turn are hunkering down and cutting back on hiring. The nation's unemployment rate jumped to 6.1 percent in August, a five-year high. So far this year, a staggering 605,000 jobs have vanished. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable. A growing number of analysts predict the economy will shrink in the final quarter of this year and in the first quarter of 2009 as the mounting damage of the housing, credit and financial debacles take their toll.
