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Economic Data Show U.S. Growth Slowing Considerably

July 29, 2011 at 12:00 AM EDT
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HARI SREENIVASAN: New economic data released today showed U.S. growth is slowing considerably. The Commerce Department reported the economy expanded at a rate of 1.3 percent in the second quarter, far below expectations. And first-quarter growth numbers were revised sharply downward.

The latest figures reveal the U.S. economy is still smaller than it was when the recession officially began in 2007. That news, combined with the debt ceiling debate in Washington, dragged stocks on Wall Street down. The Dow Jones industrial average lost nearly 97 points to close at 12,143. The Nasdaq fell more than nine points to close at 2,756. And for the week, the Dow lost 4 percent. The Nasdaq fell 3 percent.

For more on this, we turn to Hugh Johnson, chief investment officer at his firm.

Thank for being with us.

HUGH JOHNSON, Hugh Johnson advisors: Nice to be with you.

HARI SREENIVASAN: All right.

So, first things first. When you saw those numbers this morning, were you surprised?

HUGH JOHNSON: Yes, I was both surprised and obviously very disappointed — surprised, I think, from a point of view of myself and just about every economist that I know was forecasting something a little bit better than that, something close to 1.8 percent, 1.9 percent.

So, when it came in at 1.3 percent, obviously, that’s a little bit of a surprise, but primarily a disappointment. I mean, if you look at these numbers — and you mentioned the revision of the first quarter — if you look at these numbers, the economy is very, very weak, whether we measure it by GDP, which, today, that’s our scoreboard for the economy, or employment, this economy is not doing very well, very, very soft and very, very disappointing.

HARI SREENIVASAN: And what about those consumer spending numbers? A lot of times, people say the economy is propped up by people spending. And that seems to be going down.

HUGH JOHNSON: Well, that’s — that’s the most important part of the report — or the most important part of our economy. That’s 70 percent of our economy.

If you look within this report and you ask yourself are there any big surprises or any reasons for the weakness that we saw, the first one that jumps out at you is consumer spending. Consumer spending was significantly softer or weaker than we had expected. We knew it was going to be soft. We knew food prices went up. We knew prices at the pump went up.

We knew that there were disruptions for the automobile sector of the economy, and, therefore, spending on automobiles declined sharply in the second quarter. We knew all that. But we didn’t know it was going to be as sharp a retrenchment, shall we call it, in consumer spending during the second quarter as it turned out to be. It was very, very weak.

The other reason for the weakness in the report was spending by governments, primarily state and local governments. That, we expected. But the slowdown in consumer spending, quite frankly, Hari, was very, very significant.

HARI SREENIVASAN: All right, Hugh Johnson, many thanks for your time.

HUGH JOHNSON: You’re welcome.

HARI SREENIVASAN: Fuel standards for cars and trucks are going up. President Obama made the announcement today in Washington in a compromise deal worked out with 13 major automakers.

Under the new standards, fuel-efficiency for cars and light trucks would double to 54.5 miles per gallon by 2025. They will be phased in beginning with 2017 models.

President Obama said the savings are vital to reduce dependence on foreign oil and save money.

PRESIDENT BARACK OBAMA: Think about what this means. It means that — filling up your car every two weeks instead of filling it up every week. It will save a typical family more than $8,000 in fuel costs over time. And consumers in this country as a whole will save almost $2 trillion in fuel costs. That’s “trillion” with a “T.”

HARI SREENIVASAN: The new standards will also cut greenhouse gas emissions from exhaust in half. The deal was less than what environmentalists and public health advocates had pushed for, but more than what Detroit automakers wanted.

Tropical Storm Don churned towards southeastern Texas today. It packed maximum sustained winds of 50 miles per hour. It was expected to make landfall near Corpus Christi later tonight. But many coastal communities were already experiencing strong winds and rough surf. Texas needs the rain. More than 90 percent of the state is currently in extreme or exceptional drought.

A pair of roadside bombs in southern Afghanistan today killed at least 19 people, including some children. Both blasts went off in the Helmand Province when a minibus and a tractor struck separate mines. Meanwhile, in the east, a bomb killed two NATO service members. There was no word on their nationalities or the specific location of the attack.

Thousands of Egyptian protesters gathered in Cairo’s Tahrir Square today, six months after a popular uprising made the square famous. It was filled with Egyptians supporting a variety of political movements, including ultra-conservative Muslims calling for the implementation of strict Islamic law. Protesters braved the heat to step up pressure on the country’s ruling military council and repeat demands for reform. It was one of the largest crowds to fill Tahrir Square since President Hosni Mubarak was ousted from power in February.

Norwegians paused today for memorial services and the first funerals of the victims of last week’s twin attacks. The number of dead was raised to 77. And police said it was likely the self-confessed killer, Anders Behring Breivik, acted alone.

We have a report from Emma Murphy of Independent Television News.

EMMA MURPHY: Led by a priest and an imam, the first of Norway’s funerals was a renunciation of all Anders Breivik stood for, Christian and Muslim standing together to mourn 18-year-old Bano Rashid. She had fled Iraq for sanctuary in Norway, yet died in the kind of attack that would be shocking even in her homeland — the girl known as “Sun Rays” for her happy demeanor the first Muslim to be buried in this Christian graveyard.

ELLA LYKKE, friend of Bano Rashid: She was sunshine. I mean, everybody she met was touched by her smile. And she was so happy all the time. And it was just — it was just — and she was very engaged. She worked a lot with politics, with solidarity, helping other people. And she was just amazing.

EMMA MURPHY: Across Norway, services have been held to remember the dead a week on. The governing Labor Party, whose offices were bombed and youth wing targeted, gathered just yards form the scene of the first attack – Prime Minister Jens Stoltenberg leading his shattered country in another minute’s silence.

On the mainland, close to Utoya Island, scene of such horror a week ago, flowers were laid in memory of those sought out and shot down by Breivik. How relaxed those young victims were in the hours before their deaths is clear from these newly released photographs. They offer a glimpse of the idyllic environment Breivik violated and the young people he killed.

HARI SREENIVASAN: A court also appointed two psychiatrists to try and discover why Breivik staged the attacks and determine whether he is insane. They have until Nov.1 to report back.

Those are some of the day’s major stories.