WASHINGTON 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 country 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. 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 U.S. 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 U.S. and is the best barometer of the country's economic health.
Since the spring, the economy has lost traction.
"The latest tightening of the credit crunch will hit an economy that was already deteriorating sharply," said Nigel Gault, economist at Global Insight.
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 on the country.
"The bailout plan ... should not be seen as a means of avoiding recession, but as a way reducing its severity," Gault said.