The U.S. recovery appears to be faltering after a slowdown in consumer spending dampened growth and fueled fears of a double dip recession.

President Barack Obama's hopes of a strong showing in November's congressional elections took a blow as official figures revealed that the U.S. economy grew at an annualized rate of 2.4% in the second quarter compared with 3.7% in the first three months of the year.

Slower growth across the U.S., where almost one in 10 are out of work, was expected by economists. But many expressed surprise at the extent of the slowdown and the continued anxiety among consumers. While business investment grew strongly, consumers sat on their hands. Spending on services was especially weak with figures showing a meager 0.8% annual rise.

Christina Romer, chair of the White House council of economic advisers, said the growth had averaged more than 3% in the first half of the year, but expressed concern at a slowing trend.

"This solid rate of growth indicates that the process of steady recovery from the recession continues. Nevertheless, faster growth is needed to bring about substantial reductions in unemployment. Much work clearly remains to be done before the economy is fully recovered," she said.

Gerard Lyons, chief economist at Standard Chartered, said the U.S. was continuing to grow but unlike previous recoveries was failing to gain momentum.

"Normally at this stage of the recovery we see confidence returning, but that just isn't happening at the moment. Instead we see anxiety about the future and the outlook for sub-trend growth," he said.

Lyons warned that while a policy of low interest rates and support for the banking sector was keeping the economy from slipping back into recession, there would need to be further injections of funds by the Federal Reserve by the end of the year to maintain growth.

"I think we will see further monetary easing in the U.S. and the U.K. in the second half of the year."

In the first half of the year the U.S. government maintained subsidies for home buyers and a range of other spending programs to stimulate the battered economy.

However, the injection of federal funds has increasingly been outweighed by steep cuts in local spending as individual state's wrestle with huge fiscal deficits.

California is struggling to pay its bills amid a row over $11 billion of cuts in spending. State finance minister John Chiang has threatened to pay for services with I.O.U.'s until governor Arnold Schwarzenegger reaches agreement with state legislators.

The debt crisis enveloping the state has already prompted ratings agencies to downgrade its bonds.

Other states are pushing through cuts to balance their books after they protected public spending during the downturn last year.

Republicans have demanded the democrat-led Congress and President Obama withdraw the fiscal stimulus that re-flated the economy in the second half of last year and provided support for much of the growth in the first half of 2010.

Economists said the withdrawal of public funds at federal and state level would slow growth in the second half. Some critics, including leading liberal economists Paul Krugman and Joseph Stiglitz, have argued the administration risks pushing the economy back into recession.

Major revisions to the GDP figures showed growth was stronger in the first half, up from an original estimate of 2.7% to 3.7%. However, the commerce department said revisions showed the recession caused a bigger dent in growth and output contracted 4.1% peak to trough versus 3.7% previously reported.