Teetering on the brink of recession

The US economy is at risk of slipping into another recession. It nearly stalled in the first six months of the year, the government reported on Friday. The new picture of an economy far weaker than most analysts had expected suddenly made a second recession a more serious threat. "The only question now is, how much weaker could things get?" said Nariman Behravesh, chief economist at IHS Global Insight. Article continues below In April, May and June, the economy grew at a 1.3 per cent annual rate, below expectations. And the government changed its growth figure for January, February and March to 0.4 per cent, far below the previous estimate of 1.9 per cent. Worst performance Combined, the first half of the year amounts to the worst six-month performance since the recession officially ended in June 2009. Over the past year, the GDP recorded growth of 1.6 per cent. Since 1950, year-to-year growth has dipped below 2 per cent 12 times. Ten of those times, the economy was already in recession or soon fell into one, said Mark Vitner, senior economist at Wells Fargo Securities. Normal economic growth is closer to 3 per cent. High petrol prices leave people with less money to spend on other goods and services. And not all spending on petrol contributes to the US economy because some of the money goes to oil-producing countries. Manufacturing disruptions from the Japan earthquake, cuts in state and local government and tighter household budgets have weighed down the economy, too. Add to those problems the uncertainty fanned by the political stalemate in Washington, with Republicans refusing to raise the federal government's $14.3 trillion borrowing limit unless Democrats agree to deep federal spending cuts on the GOP's terms. Without an agreement, the Treasury Department says, the government won't have enough money to pay all its bills after tomorrow. It will have to cut spending by about 40 per cent and choose which programmes and beneficiaries receive money and which don't.