US economy grew just 1% in second quarter

The U.S. economy grew at a meager 1 per centannual pace this spring, slower than previously estimated. The downwardrevision will likely increase fears that the economy is at risk of anotherrecession.

Fewer exports and weaker growth in business stockpiles ledthe Commerce Department to lower its estimate for the April-June quarter fromits previous rate of 1.3 percent growth. That means the economy expanded only0.7 per cent in the first six months of the year.

Nine of the past 11 recessions since World War II have beenpreceded by a period of growth of 1 percent or less, economists note. Still,many said the revision hasn't changed their outlook for the rest of this year.

The weaker growth could rattle an already edgy stock market,which has lost 12 percent of its value since July 21.

Stock futures fell after the report was released.

Economists worry this summer's sell-off on Wall Street couldhurt growth in the second half of the year, if consumers and businesses pullback on spending and investment.

High gas and food prices have already eroded consumers'buying power. Spending increased only 0.4 percent in the April-June period, theweakest growth since the final three months of 2009.

The revision showed spending was a bit higher than thegovernment's first estimate of 0.1 percent growth. But the increase mostlyreflected greater spending on health care, insurance and financial services,the government said.

People bought fewer long-lasting manufactured goods, such asautos and appliances. Those purchases fell 5.1 percent this spring, the biggestdrop since the final three months of 2008. That partly reflects a shortage ofautos on many dealer lots after the March 11 earthquake in Japan.Consumers spending accounts for 70 percent of growth.

Federal Reserve Chairman Ben Bernanke will deliver ahighly-anticipated speech later Friday in Jackson Hole, Wyo. Investorshope he will signal that the Fed will launch a new effort to boost the economy,but analysts don't expect anything ambitious.

The central bank has already cut the benchmark short-terminterest rate it controls to nearly zero, and last week pledged to keep itthere until mid-2013. But so far lower interest rates haven't helped: mortgagerates, for example, are already at record lows, and home sales are stillfalling.

Several dismal economic reports have suggested the economyworsened in the July-September quarter, sending the stock market lower.Manufacturing in the mid-Atlantic region contracted in August by the most inmore than two years, a survey by the Federal Reserve Bank of Philadelphia found. A Richmond Fed surveyreleased Tuesday and a New York Fed survey last week also pointed to slowdownsin those areas, although not as severe.

There have been some positive signs. The economy added117,000 net jobs in July, twice the number added in each of the previous twomonths. Consumers spent more on retail goods last month than in any month sinceMarch. U.S. automakers reboundedlast month to boost factory production by the most since the Japan crisis.

Most economists aren't forecasting a recession. JPMorganChase projects the U.S.economy will grow only 0.9 percent this year and 1.7 percent in 2012, muchlower than the bank's estimates just a few weeks ago. Other economists havemade similar downgrades.

Thursday's report is the second of three estimates thegovernment issues for each quarter's economic growth. The estimates are updatedwith more recent data that wasn't available for the first take.