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Kimberly Amadeo

Economy Still Chugging Along — and the Recession Was Worse Than We Thought

By July 29, 2011

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The U.S. economy grew 1.3%  in the  second quarter (April-June) 2011, according to the BEA's "advance" estimate of GDP. This was significantly better than the revised .4% growth in the first quarter.

Wait a minute, you say. I thought the BEA told us just last month that  the economy grew 1.9% in Q1. Well, it did...and now it's revised it. In fact, it revised the past  three years of  GDP estimates, based on new data.  It shows the economy contracted 8.9% in Q3 2008 - much worse than previously thought.

The economy is not growing fast enough, about 3% or so,  to create new jobs. It's also slower than the ideal2% growth rate needed to maintain the status quo. However, this sluggishness may only be temporary, as it was a result of the Japanese tsunami that's slowed orders of durable goods. Personal consumer expenditures are hanging in there, although not a great as they were during the holiday sales.

Exports have fallen a bit, which doesn't help, but the main culprit is a reduction in non-defense government spending. Expect GDP to worsen as the budget-cutting continues. Imports, which are a subtraction in the calculation of GDP, decreased - so this decrease in consumer spending actually helps the economy. In other words, if you want to boost growth and jobs, buy local!

For a history of all GDP reports since 2007, see GDP Current Statistics.

What It Means to You

The U.S. economy is sluggish, but emerging markets are booming. The BRIC countries -- Brazil, Russia, India and China -- are still growing strong. If you are an investor, make sure your portfolio has plenty of foreign-based mutual funds.

If you are a small business owner, explore how you can expand your exports. These BRIC countries are growing their middle class --- and purchasing power. Businesses who provide value to these and other emerging markets will prosper in the landscape that is emerging beyond the Great Recession.

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