Fears rise as US growth slowing

THE US recovery appears to be faltering after a slowdown in consumer spending dampened growth and fuelled fears of a double-dip recession.

President Barack Obama's hopes of a strong showing in November's congressional elections took a blow as official figures revealed that the US economy grew at an annualised rate of 2.4 per cent in the second quarter compared with 3.7 per cent in the first three months of the year.

Slower growth across the US, where almost one in 10 are out of work, was expected by economists. But many expressed surprise at the extent of the slowdown and the continued anxiety among consumers.

While business investment grew strongly, consumers sat on their hands. Spending on services was especially weak with figures showing a meagre 0.8 per cent annual rise.

Christina Romer, the chairwoman of the White House council of economic advisers, said the growth had averaged more than 3 per cent in the first half of the year, but expressed concern at a slowing trend.

''This solid rate of growth indicates that the process of steady recovery from the recession continues.

Nevertheless, faster growth is needed to bring about substantial reductions in unemployment. Much work clearly remains to be done before the economy is fully recovered,'' she said.

Standard Chartered chief economist Gerard Lyons said the US was continuing to grow but unlike previous recoveries was failing to gain momentum.

''Normally at this stage of the recovery we see confidence returning, but that just isn't happening at the moment. Instead we see anxiety about the future and the outlook for sub-trend growth,'' he said.

Mr Lyons warned that, while a policy of low interest rates and support for the banking sector was keeping the economy from slipping back into recession, there would need to be further injections of funds by the Federal Reserve by the end of the year to maintain growth.