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The U.S. economy continued to grow during the second quarter, the government reported Friday. But the pace slowed more than economists were expecting, raising concern about growth - or even another recession - in the months ahead.

Gross domestic product, the broadest measure of the nation’s economic activity, rose at a 2.4% annual rate during the three months ended June 30, the Commerce Department said.

The sluggish pace was down from the upwardly revised 3.7% growth rate in the first quarter, and missed economists’ forecast for a 2.5% increase.

Still, the figure marked the fourth straight quarter of growth and gave credence to some economists’ views that the recession that began in December 2007 likely ended at some point in mid-2009.

"This solid rate of growth indicates that the process of steady recovery from the recession continues," said Christina Romer, chair of the White House Council of Economic Advisers, in a statement.

"Nevertheless, faster growth is needed to bring about substantial reductions in unemployment," she added. "Much work clearly remains to be done before the U.S. economy is fully recovered."

Most troubling to economists - particularly in the months ahead - was a slowdown in consumer spending, which accounts for 70% of economic activity.

Nigel Gault, chief U.S. economist at IHS Global Insight, said the subdued consumer spending, pressured by high unemployment and debt as well as a lack of income and credit access, could lead to slower growth - or even another downturn.

"People are continuing to cut back, and that could mean that third-quarter growth will be the worst since the end of the recession," Gault said. "The slowing growth path leaves the possibility of a double-dip recession on the table."

The report showed consumer spending rose at a modest 1.6% rate last quarter. That compares to a 1.9% rise during the first quarter, revised down from a previously reported 3%.

A surge in imports also weighed on domestic growth, the government said. Imports spiked 28.8% during the second quarter, up from an 11.2% hike in the previous quarter.

But that increase was mostly due to 17% jump in business investments, as business increased spending by 22% on software and equipment, which Gault said are primarily produced outside of the United States.

"Businesses reduced spending very sharply last year during the recession by cutting costs and employees," Gault said. "The pullback helped them prop up profits. Companies are sitting on huge piles of cash, which they’re now putting to work."

While they’re willing to refresh their technology equipment, Gault said businesses are still cautious when it comes to hiring, and that will continue to strain the economy.

He added that the quarter’s significant increases in housing and government spending were driven by temporary factors and will likely reverse into declines in the current quarter.

The report showed that residential investment climbed 28% during the second quarter, as Americans rushed to buy homes ahead of the expiration of the homebuyer tax credit.

And government spending rose 9.2% during the quarter, up from 1.8% in the first quarter. Gault attributed that growth to spending related to the decennial census.

Recession deeper than previously thought

Revisions to annual GDP rates also released Friday indicated that the economic downturn was worse than the government previously estimated, and the recovery was more slack.

Between the fourth quarter of 2007, when the recession officially began, and the second quarter of 2009, when many economists say it ended, GDP dropped by 4.1%, marking the deepest recession since 1947. The government’s prior estimate for the overall decline during the period was 3.7%.

"It now appears that the financial crisis may have affected production substantially more quickly than was previously reported or realized at the time," Romer said.

The most significant factor in the downward revisions was muted consumer spending, but the data also showed that the consumer savings rate is higher than expected.

Annual growth rates for 2007, 2008 and 2009 were all revised lower.

In 2007, the government said the economy grew at a rate of 1.9%, down from the 2.1% it reported earlier. In 2008, economic activity was flat instead of ticking up 0.4%. And in 2009, the economy shrank at a rate of 2.6%, weaker than the 2.4% rate previously estimated.

"While the recession was somewhat deeper than originally thought, the recovery was also much more tepid that previously thought and is slowing rather than accelerating," said Martin Regalia, chief economist for the U.S. Chamber of Commerce, which has been critical of Obama administration business policies.

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SurModics Pharmaceuticals, a Birmingham subsidiary of SurModics Inc., has agreed to license a biodegradable polymer implant technology being developed to treat sun-induced skin disorders to an Australian pharmaceutical firm.

SurModics licensed the SCENESSE implant formula to Australian-based Clinuvel Pharmaceuticals. The two companies have collaborated on developing the formula that is a prophylactic treatment for a range of UV and light-related skin disorders for several years.

“We are very pleased to announce the execution of this important license agreement with Clinuvel,” said Phil Ankeny, interim CEO of SurModics. “This announcement demonstrates the value of our sustained drug delivery technologies and reinforces how we partner with our customers to develop and bring to market compelling products that leverage our core technologies cash advance loans.”

Drugs released from the prophylactic causes melanin production in the skin to protect from ultraviolet rays. Estimates from the Royal Bank of Scotland projects the treatment could impact as many as 7 million people worldwide, according to a release from SurModics.

“Today’s announcement represents a natural progression of our relationship with Clinuvel,” said Arthur J. Tipton, senior vice president and chief scientific officer of SurModics. “Together, our teams have solved numerous scientific and technical issues over the years culminating in the signing of this licensing agreement. Clinuvel’s product provides a novel way to treat serious skin disorders.”

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HealthPlan Holdings Inc. said that it has acquired GEMGroup.

Financial terms were not disclosed in a release announcing the purchase.

GEMGroup, headquartered Pittsburgh, specializes in accounting, pension and 401(k) administration software and services to self-funded and Taft-Hartley employee benefit plans for unionized workers, the release said.

The acquisition enhances the outsourcing technology and services that HealthPlan provides to the nation’s largest Taft-Hartley benefit plans, the release said low fee payday loans. It also expands HealthPlan’s presence in the northeastern United States, where GEMGroup has five offices employing more than 120 people.

HealthPlan Holdings, headquartered in Tampa, provides outsourcing solutions to insurers in the individual, small business and union trust markets, and employs roughly 1,100 associates.

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Pinnacle Partners LLC of Quincy, Mass., filed Friday to liquidate under Chapter 7 of the U.S. bankruptcy code.

The company listed assets of less than $50,000 and liabilities in the range of $1 million to $10 million.

The major creditor with a secured claim — a pair of mortgages totaling $600,000 — is South Shore Savings Bank.

A major unsecured creditor is Pinncon LLC of Braintree, listed as holding a claim valued at $103,000.

Pinnacle is represented in the bankruptcy by David B. Madoff of Madoff and Khoury in Foxborough.

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The mortgage meltdown is hitting the African-American and Latino communities harder than whites, a new study has found.

Of borrowers who took out mortgages between 2005 and 2008, some 8% of both African-American and Latino borrowers have lost their homes to foreclosure, compared to 4.5% of non-Hispanic whites, according to a study by the Center for Responsible Lending, released Friday.

The racial and ethnic disparities continued even after controlling for income differences. The center’s research shows that African-American and Latino borrowers were about 30% more likely to get higher rate subprime loans than white borrowers with similar risk characteristics.

Of the total pool of homeowners, 17% of Latinos have lost their homes to foreclosure or are at imminent risk of losing their homes, while 11% of African-Americans are in that position. By comparison, 7% of non-Hispanic whites have lost their homes or are about to.

The reason for the disparity is that African-Americans and Latinos were marketed riskier, higher cost loans that became unaffordable during the mortgage and economic crisis, said Keith Ernst, the center’s director of research.

"These are more expensive mortgages," he said. "They are more likely to fail."

African-American and Latino communities are likely to lose $373 billion in declining property values between 2009 and 2012.

The report also found that an estimated 2.5 million foreclosures were completed between 2007 and the end of 2009. This is roughly one in every 20 mortgages outstanding at the time of the crisis.

More than eight in 10 of these foreclosures were on owner-occupied homes with mortgage originated between 2005 and 2008.

An estimated 5.7 additional foreclosures are imminent.

"This crisis still has a long way to go," Ernst said. 

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Initial claims for unemployment insurance climbed last week, the government reported on Thursday.

The Labor Department’s report showed that jobless claims jumped 12,000 in the week ended June 12, compared to the prior week’s revised total of 460,000 claims.

Economists were expected initial jobless claims of 450,000 for the week ended June 12, according to Briefing.com consensus.

The report took the wind out of gains in the U.S. futures market.

The report was released one day after Senate Democrats revised a jobs bill, scaling back unemployment benefits and Medicare physician reimbursement measures. This revision would eliminate a $25 weekly supplement for the jobless that had been part of last year’s stimulus act.

The cut will reduce the bill’s cost by $5.8 billion over the next decade. 

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Local government in Wichita should establish a more stringent set of guidelines as it examines whether to support public-private development proposals in the city’s core, the city’s downtown development consultants said Monday.

As they laid out their draft master plan for downtown Wichita, Goody Clancy executives said the city should ensure that public dollars are spent on projects that have strong public-use components — such as parking garages and public parks. Government also should establish a point system to score potential projects and developers on whether their programs are viable and worth helping.

But the city should be ready with incentives to develop downtown sites, which often are plagues with land acquisition hurdles, environmental concerns and parking issues.

“If we don’t want to play that game, then we run the risk of stagnation and deterioration,” said Sarah Woodworth, a member of the Goody Clancy team.

The Boston-based consulting firm presented its draft plan on Monday during a public meeting at the Wichita Scottish Rite building. The meeting will be followed later this week with a series of public input sessions.

Goody Clancy executives said city capital should be used only for projects that have a strong public benefit so the money has a broader impact than just the private sector project itself.

The city also should establish a point system to rate projects, the consultants said. Criteria could be whether a developer has downtown development experience in the area, how financial solvent he is and whether his proposed development agreement would be fair to all parties.

On financing, Woodworth said, “We should not have any criteria that a bank would not have.”

The projects themselves would have to fit into the downtown master plan. The city should push for them to have a design and location that promotes downtown walkability — one of the key elements of Goody Clancy’s work. Projects also should include buildings at least two stories tall to fit with the character of downtown and shouldn’t come with surface parking lots.

“It doesn’t make for a very pleasant walking environment,” said Goody Clancy’s Ben Carlson.

Goody Clancy’s draft plan, which has been in the works for six months, also laid out a series of possibilities for different areas of town payday advance.

The consulting team laid out numerous potential development districts with their own identities, such as Old Town, Commerce Street Arts, Douglas-Delano, Douglas-Arkansas River, Century II-WaterWalk and the governmental center.

The consultants also made several proposals within some of those districts, offering up sketches for the sites to help people visualize what could happen there.

At the Broadview Hotel near Century II, the consultants suggested the city extend Water Street south to WaterWalk and create a new development site at Douglas and Water that could hold retail and dining. They also said a hotel could be established near the site. All of that would serve Century II and warm up a streetscape that today is wide and relatively unfriendly to pedestrians.

At Broadway and William, Goody Clancy consultants said the former Allis Hotel site could be converted to a park with a parking garage. The former Henry’s store could be converted to 50,000 square feet of office, and the Douglas building just north of there could be rehabbed as an apartment building. A parking garage could serve both the Henry’s and Douglas street buildings.

At Douglas and St. Francis, the consultants urged an improvement of the connection between Old Town and Intrust Bank Arena with more unique pavement styles for pedestrians. They also said Naftzger Park at that intersection could be improved and a hotel could be built just east of it near the Central Rail Corridor. New housing also could be built into existing buildings near that corner.

Just to the east, near Union Station, the city should install a stop light to make that intersection more pedestrian friendly, the consultants said. A parking lot on the northwest side of that intersection could be home to a new residential, office and retail building. The parking that currently is on that site could be moved south to a newly built parking garage.

The consulting team also had renderings for the site of the new public library, the site of the old Coleman factory near Old Town and the site of the 1st Street Bridge over the Arkansas River.

In some cases, the city owns land in those areas and could steer development in the way it chooses, the consultants said.

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Severn Bancorp Inc. pared its loss in the first quarter, setting aside less money to cover potential losses in its loan portfolio.

The Annapolis-based parent of Severn Savings Bank (NASDAQ: SVBI) lost $528,000, or 10 cents a share, for the three months ended March 31. That was an improvement from the $1.3 million, or 18 cents a share, the company lost in the period a year earlier.

During first quarter 2010 Severn added $2.5 million to its loan-loss reserves, down from $4.5 million a year earlier and $5.5 million in fourth quarter 2009.

Severn’s capital levels exceed the requirements for federal banking regulators to consider the bank “well capitalized,” it said in a press release Thursday no faxing pay day loans.

“While we are not satisfied with the loss for the quarter, we are encouraged by the improvement in asset quality and the prospects for improved performance for the remainder of 2010,” Severn CEO Alan J. Hyatt said in a statement.

Severn Savings Bank has four branches in Annapolis, Edgewater and Glen Burnie.

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Add the Catskill District Off Track Betting Corp. to the recently formed coalition of Upstate OTBs that will be operating under a joint agreement to assist in marketing and operational expenses.

The agreement has already brought the Western Regional Off Track Betting Corp. and its counterparts in Suffolk County and the Capital District together under the pact.

The Catskill OTB has 25 locations in 10 Hudson Valley and Southern Tier counties including Chemung, Broome, Sullivan and Ulster counties. The deal now puts 174 upstate OTB branches and satellite locations under the domain of the joint agreement.

With Catskill OTB joining ranks with its three fellow off track betting groups, only the Nassau County and the financially-beleagured New York City OTB have yet to take part in the agreement. Talks remain underway with both groups.

“These are difficult times and we have to look at all options,” said Donald Groth, Catskill District OTB president and chief executive officer. “We, the OTBs, have to take the bull by the horns unsecured personal loans.”

The OTBs are facing increased competition from casinos and the continued impact of the weakened national economy.

“We all need to find ways to reign in expenses and stay ahead of the curve,” Martin Basinait, Western Regional OTB president and chief executive officer and the designated administrator for the joint agreement, said earlier this week.

Among the potentially cost-saving measures includes the three OTBs running one, central Web site, operating a single, statewide racing television station as well as an Internet TV station, creating a statewide marketing campaign and running an upstate and downstate phone center.

While many of the areas covered by the new agreement are behind-the-scenes measures, the most visible aspect — the statewide marketing campaign — will start within the next two months, beginning with a radio campaign in the Capital district.

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The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades.

Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village.

Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue.

Marc Faber, publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.”

Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai.

Dubai Times a Thousand

Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.”

China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off.

Risk for Commodities

Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. Retail sales during last week’s Lunar New Year holiday rose 17.2 percent from the same period in 2009, according to the Ministry of Commerce.

While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets.

In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009.

Bidding Up Prices

“If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd.

The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history.

Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data.

Bridge of Strength

Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin, a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd., the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International.

Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview.

Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported.

Real Estate or Soybeans?

Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia, 25 kilometers (15 miles) outside the existing municipality of 1.5 million people.

Mark Mobius, meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.”

Chris Ruffle, who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.”

Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans.

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