USA: Economy Has Worst Growth Since 2002 (in Jan-Mar 2007 quarter)

[Guest guest]

Dear friends,

 

The data coming out shows that economic growth was the worst in the

first three months of this year, when the transits were becoming

uniquely difficult in the SAMVA USA Chart.

 

Best wishes,

 

Thor

 

 

Economy Has Worst Growth Since 2002

Thursday May 31, 1:14 pm ET

By Jeannine Aversa, AP Economics Writer

Economy Grows by Just 0.6 Percent in the 1st Quarter, Worst Since

Final Quarter of 2002

 

WASHINGTON (AP) -- The economy nearly stalled in the first quarter

with growth slowing to a pace of just 0.6 percent. That was the worst

three-month showing in over four years.

 

The new reading on the gross domestic product, released by the

Commerce Department Thursday, showed that economic growth in the

January-through-March quarter was much weaker. Government

statisticians slashed by more than half their first estimate of a 1.3

percent growth rate for the quarter.

 

The main culprits for the downgrade: the bloated trade deficit and

businesses cutting investment in supplies of the goods they hold in

inventories.

 

" We are still keeping our head above water -- barely, " said economist

Ken Mayland of ClearView Economics.

 

For nearly a year, the economy has been enduring a stretch of subpar

economic growth due mostly to a sharp housing slump. That in turn has

made some businesses act more cautiously in their spending and investing.

 

The economy's 0.6 percent growth rate in the opening quarter of this

year marked a big loss of momentum from the 2.5 percent pace logged in

the final quarter of last year.

 

Federal Reserve Chairman Ben Bernanke doesn't believe the economy will

slide into recession this year, nor do Bush administration officials.

But ex-Fed chief Alan Greenspan has put the odds at one in three.

 

On Wall Street, investors took the weak GDP showing in stride. The Dow

Jones industrials were up 22 points and the Nasdaq gained 14 points in

morning trading.

 

The first-quarter's performance was the weakest since the final

quarter of 2002, when the economy was recovering from a recession. At

that time, GDP eked out a 0.2 percent growth rate. Economists were

predicting the first-quarter performance this year would be

downgraded, but not as much as it did. They were calling for a 0.8

percent pace.

 

GDP measures the value of all goods and services produced in the

United States. It is considered the best measure of the country's

economic fitness.

 

In other economic news, the Labor Department reported that fewer

people signed up for unemployment benefits last week. New filings

dropped by 4,000 to 310,000. That suggests the employment climate is

weathering well the economy's sluggish spell.

 

Another report showed that construction spending edged up by 0.1

percent in April, down from a 0.6 percent gain in the previous month.

Spending by private builders on nonresidential projects and spending

by the government on big projects each climbed to all time highs in

April but that strength was tempered by continued weakness in

residential construction.

 

In the GDP report, many economists believe the first quarter will be

the low point for this year. They expect growth will improve but still

be sluggish.

 

The National Association for Business Economics predicts the economy

will expand at a 2.3 percent pace in the April-to-June quarter.

 

In the first quarter, there was a larger trade deficit than first

thought. That ended up shaving a full percentage point from the GDP.

Businesses cut back on inventory investment as they tried to make sure

unsold stocks of goods didn't get out of whack with customer demand.

That lopped off nearly a percentage point to first quarter GDP.

 

Those were the biggest factors behind the government slicing its

initial GDP estimate released a month ago by as much as it did.

 

The sour housing market also restrained overall economic activity.

Investment in home building was cut by 15.4 percent, on an annualized

basis, in the first quarter. However, that wasn't as deep a cut as the

17 percent annualized drop initially estimated. And, it wasn't as

severe as the 19.8 percent annualized drop seen in the final quarter

of last year.

 

Even so, there is no doubt that troubled housing market is one of the

biggest problems for the economy. Although some businesses tightened

the belt in the first quarter, consumers did not. That helped to

prevent the economy from stalling out altogether.

 

Consumers boosted their spending by a 4.4 percent growth rate in the

first quarter, the most in a year. Consumer spending accounts for a

major chunk of economic activity.

 

Some economists wonder how much interest consumers will have in

continued brisk spending, however, given rising gasoline prices that

have topped $3 a gallon in many markets. More money spent filling up

the gas tank leaves less to spend on other things.

 

One of the reasons consumers have stayed so resilient even as the

housing market has been stuck in a rut for a year is because the job

market has been good. Employers -- still enjoying profits -- are

keeping a close watch on spending but they are not drastically

clamping down on hiring.

 

Companies profits gained a bit of ground in the first quarter. One

measure showed after tax profits rising by 1 percent, up from 0.8

percent in the fourth quarter.

 

An inflation gauge tied to the GDP report and closely watched by the

Fed showed that core prices -- excluding food and energy -- rose at a

rate of 2.2 percent in the first quarter. That was unchanged from an

initial estimate but up from a 1.8 percent pace in the fourth quarter.

 

The Federal Reserve's key interest rate has been at 5.25 percent for

nearly a year. Many economists predict the rate probably will stay

right where it is through the rest of this year.