Economy near standstill during second quarter

WASHINGTON -- The economy came to a virtual standstill in the second quarter, the government said Friday, another ominous sign that the Sept. 11 terror attacks probably pushed the country into recession.

With those attacks causing billions of dollars in lost business, forcing thousands of layoffs and dragging down consumer confidence, many economists believe a full-blown downturn is unavoidable.

"We're having a crisis of confidence," said Mark Zandi, chief economist for Economy.com. "A bunker mentality has descended. ... Consumers are pulling back. Businesses are retrenching."

The economy was teetering even before the attacks, suffering through a slowdown that abruptly started in the second half of last year.

Gross domestic product, the output of goods and services produced in the United States, grew at an anemic annual rate of just 0.3 percent in the April-June quarter, the Commerce Department reported Friday.

It was the weakest performance in more than eight years.

The latest reading on GDP followed a 1.3 percent growth rate in the first quarter and illustrated the continued dramatic weakening of the economy this year.

The new second quarter figure was slightly higher than a 0.2 percent estimate of second-quarter growth made a month ago, an improvement the government said came from a slightly better-than-anticipated trade performance.

Many analysts are predicting it will be the last quarter of economic growth this year.

The Blue Chip Economic Indicators consensus expects the GDP to shrink by 0.5 percent in the July-September quarter and decline by 0.7 percent in the final three months of the year before returning to growth early next year. A recession is commonly defined as two consecutive quarters of declining GDP.

Plan expected next week

"The president remains concerned about the status of the economy," White House spokesman Ari Fleischer said. President Bush, he said, is focused on reaching an agreement with Congress on a plan to stimulate economic growth, something many expect to be revealed next week.

Billions of extra dollars for reconstruction and to help the airlines, which were hammered by the suicide hijackings, have already been authorized.

Federal Reserve policy-makers, who cut short-term interest rates last week, are expected to cut them again -- which would be the ninth reduction this year -- when they meet next Tuesday. Analysts are divided on whether they will cut by a half-point or a quarter-point.