U.S. economy posts sluggish growth in first half

The economy expanded in the spring at the meager annual rate of 1.3% after scarcely growing at all in the first three months of the year, the Commerce Department says. The combined growth for the first six months of the year was the weakest since the recession ended. The government revised the January-March figures to show just 0.4% growth—down sharply from its previous estimate of 1.9%. High gas prices and scant income gains forced consumers to pull back sharply on spending in the spring. The sharp slowdown means the economy this year will likely grow at a weaker pace than last year. And economists don’t expect growth to pick up enough in the second half of the year to lower the unemployment rate, which rose to 9.2% last month. Economists had initially thought that a Social Security payroll tax cut would boost growth enough to lower the unemployment rate. But most of that money has gone to pay for higher gas prices. And employers have pulled back on hiring after seeing less spending by Americans. Complicating an already weak economy is the debt crisis in Washington. No matter what lawmakers do to resolve that crisis, their decision will likely slow growth in the short term. A deal to raise the borrowing limit would likely include long-term spending cuts, which would withdraw government stimulus at a precarious time. If Congress fails to raise the borrowing limit and the government defaults on its debt, financial markets could fall and interest rates could rise.