Rogoff: Slow Growth Is Natural After Financial Crisis

Thursday, 05 Aug 2010 08:45 AM

By Dan Weil

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Some experts have worked themselves into a tizzy over the U.S. economy’s growth slowdown, worrying that a double-dip recession may be on the way.

Harvard economist Ken Rogoff isn’t one of them.

“So far, the recovery is remarkably normal for a postfinancial crisis recovery,” he told The New York Times.

Rogoff recently co-authored a history of financial crises, “This Time Is Different,” with Carmen Reinhart.

GDP growth slipped to 2.4 percent in the second quarter from 3.7 percent in the first quarter and 5.0 percent in last year’s fourth quarter.

“It doesn’t mean that we should cheer that it’s been so grim,” Rogoff said. “But on the other hand, it’s not necessarily a reason to panic.”

Ethan Harris, chief economist at Bank of America-Merrill Lynch, has a similar view. “The economy is muddling through,” he told Bloomberg.

“We’re probably not going to see a really strong number for a while. We need to see some pickup in job growth.”

In the second quarter, business spending on equipment and software soared 21.9 percent. But consumer spending, which accounts for about 70 percent of economic activity, gained only 1.6 percent.

“The GDP report raises concerns surrounding the sustainability of the recovery,” David Semmens, an economist at Standard Chartered Bank, told The Wall Street Journal. “The dire contribution from the U.S. consumer will weigh on sentiment.”

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