U.S. Economy Slows To A Crawl

Weak First-Quarter Growth Rate Reflects Housing And Credit Woes

(AP)  The bruised economy limped through the first quarter of this year with only an 0.6 percent growth rate, as housing and credit problems forced people and businesses alike to hunker down.

The country's economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday.

The statistic did not meet what economists consider the classic definition of a recession, which is a retraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if modestly.

Many analysts were predicting that the gross domestic product (GDP) would weaken a bit more - to a pace of just 0.5 percent - in the first quarter.

Earlier this year, some economists thought the economy would actually lurch into reverse during the opening quarter. Now, they say they believe that will likely happen during the current April-to-June period.

Gross domestic product measures the value of all goods and services produced within the United States and is the best measure of the country's economic health. Voters are keenly worried about the country's economic problems and so are politicians - in Congress, in the White House and on the campaign trail.

The housing situation turned more bleak in the first quarter, as record-high foreclosures dumped more unsold homes on the market, adding to builders' headaches. Builders slashed spending on housing projects by a whopping 26.7 percent, on an annualized basis, the most in 27 years. That was the big drag on the economy.

Consumers - whose spending is vital to the country's economic health - turned much more cautious, also restraining overall economic growth in the first quarter. Their spending rose at just a 1 percent pace. That was down from a 2.3 percent growth rate and was the slowest since the second quarter of 2001, when the United States was suffering through its last recession.

Soaring energy and food prices are walloping people's pocketbooks, leaving them with less to spend on other things. The credit crunch also has made it harder for people to finance big ticket items, such as cars and homes. And, many homeowners - watching their homes - often their single-biggest asset - slump in value, also are feeling less wealthy and less inclined to spend.

Businesses, meanwhile, cut back spending on equipment and software at a 0.7 percent pace, the most since the final quarter of 2006. And, they trimmed spending on commercial construction at a 6.2 percent pace, the most since the third quarter of 2005.

However, businesses boosted their investment in building up stocks of supplies in the first quarter, a big force adding to GDP. Exports of U.S. goods and services also helped first-quarter growth. U.S. exports are being helped by the falling value of the U.S. dollar, which makes U.S. made goods and services less expensive to foreign buyers.

Spending by the government was another factor helping out GDP in the first quarter. That spending rose at a 2 percent pace for the second quarter in a row.

To bolster the economy, the Federal Reserve is expected to lower a key interest rate by one-quarter percentage point to 2 percent later Wednesday. That would mark a more moderate-sized rate reduction after a recent string of hefty cuts. Many economists believe the Fed, which started dropping rates last September, may be nearing the end of its rate-cutting campaign because policymakers don't want to aggravate inflation. Those rate reductions, which take months to affect economic activity, can sow the seeds of inflation down the road.

An inflation measure linked to the GDP report showed that prices grew at a rate of 3.5 percent in the first quarter, down from a 3.9 percent pace in the prior quarter.

Another gauge showed that the core prices excluding food and energy rose at a rate of 2.2 percent in the first quarter. That was a lower than the 2.5 percent pace registered in the fourth quarter but still outside the Fed's comfort zone. The upper level of the Fed's inflation tolerance is 2 percent.

Gas and food prices, however, have moved higher since the start of the year, adding to inflation pressures. Gasoline prices, which have recently set new record highs, have climbed to $4 a gallon in some parts of the country.

A growing number of economists believe the economy is in a recession and is indeed contracting now.

Under one rough rule, if the economy contracts for six straight months it is considered to be in a recession. That didn't happen in the last recession - in 2001- though. A panel of experts at the National Bureau of Economic Research that determines when U.S. recessions begin and end uses a broader definition, taking into account income, employment and other barometers. That finding is usually made well after the fact.

During the first three months of this year, job losses neared the staggering quarter-million mark. The unemployment rate has climbed to 5.1 percent and is expected to move higher in the coming months.

Fed Chairman Ben Bernanke, earlier this month, acknowledged for the first time that a recession this year was possible.

President Bush on Tuesday said the country was dealing with "difficult times." Bush said he understood Americans' anxiety over soaring gas prices, record-high home foreclosures and other economic woes.

The government's $168 billion economic-stimulus package - including tax rebates that started flowing to bank accounts on Monday - should help energize the economy in the second half of this year, the Bush administration and Federal Reserve officials say.

Democrats in Congress insist more relief needs to be provided, including additional unemployment benefits to cushion the pain of joblessness. The administration has resisted, saying the rebates and other stimulative efforts should be sufficient once they fully kick in.

[ora734]

I don''t believe any info coming from the government, if they tell the truth it might cause a panick in the markets and i would bet my life that it is a lot worse than .06% growth, propaganda info.

[ranger1948]

The problem is congresshas no incentive to do anything.

I proposed in the past that we take Bush and his cabinet and the senate and the house of representatives, line them up against a wall and shoot them. Then we elect a new group to head our government and tell them this is our new incentive plan. I think things will get taken care of very quickly.

[ranger1948]

What happened to the oil Kuwait produces. We saved theiur *** we should be there best customers and at a fair price.

[lewiston14]

Forth: I see a lot of truth in your list.
SPECIAL "CLOSED SESSION" OF U.S. HOUSE OF REPRESENTATIVES. When do you say enough? They can%u2019t fight 300 million at the same time. And by the way I loved the press dinner especially his wife%u2019s part.

[ranger1948]

randynason
I saw McCains hand go up. Unless your talking about revolution i see no way to get rid of the good old boys. We have obeyed the laws tried to elect representatives that will represent us the way we want to be represented and you see where we are at.

[veteran72]

The Neocon Nazis have had this entire scenario planned for some time now, and all is going ahead on schedule.
I personally knew we were in deep trouble when shortly after the False Flag "Attacks" on 9/11, the Neocons whip out a Los Angeles Yellow-Pages sized document, entitled the "Patriot Act", which instead of being about Patriotism, read more like the new Nazi Manifesto.
We''ve been heading toward all out Global War ever since.
Arrest and Imprisonment of the Entire Neocon Nazi Hierarchy, and ALL their Toadies, for War Crimes and High Treason, is the ONLY thing that can stop their designed Armageddon.
The chances of that taking place are slim and none.
Prepare yourselves for some really, really, bad times coming real soon.

[timeisrite]

There have to be some scary people supporting bush for him to last this long and not have been thrown out let alone in jail.
-----

With this I agree, the people need to stand up and tell those in Washington that we are tired of suffering for their mistakes and take a stand. Sure they will try to send several of us to jail for standing up and demanding a change, and I will be the first because of being so out spoken. I really believed in the American Dream, I served in the military along with other young men, but the ones in congress never new me or even the ones that never made it home. Sure there have been a few congressmen that served, but all the corrupt do is corrupt everyone around them.

My 17 year old Son asked me what kind of future I thought he was going to have. I had to tell him that it would be the best that he could make it. His reply, "Dad, how can I make a good future when there are no jobs and the government is sending grant money oversees that would pay for my college?"

He is worried about the upcoming conflict with Iran just because of a President that loves to see death and destruction. Several of his friends have been killed in actiom

[trillion1]

There have to be some scary people supporting bush for him to last this long and not have been thrown out let alone in jail.

[timeisrite]

"With the Economy going sour, who best to lead our country out of this mess than John McCain?
With McCain, will get a President who ships our defense contracts overseas, keeps NAFTA so it won''''t anger the Canadians, amnesty to illegals to make job hunting harder for Americans. John McCain. Mr NAFTA. Mr. North American Super Highway.
If you vote for John McCain this fall you should be shot in the head."

See, this is exactly what I am talking about, GET RID OF THEM ALL and start over. Like it or not Mr McCain is also part of the GOOD OLE BOYS & GIRLS. You do realize WE do have the power as Americans to call for a new general election and disqualify everyone that has been in office before. Start fresh and maybe with some everyday people that has not been schooled on how to look down on the have nots.

START FRESH a new beginning is what we need. No matter who you think has the best speech about how they will change the country, if elected President, that person has to deal with a corrupt congress. Remember the ones that are running for office are part of that corrupt congress. If you don''t think they are corrupt tell me why you think that way.

Don''t think that YOU don''t have the power to say NO MORE. This is what the founding fathers did with England and this is what WE ALL need to do now. No matter what the FED raises or drops rate, nothing has changed, corruption is in charge of the land.

[sueann702]

With the Economy going sour, who best to lead our country out of this mess than John McCain?
With McCain, will get a President who ships our defense contracts overseas, keeps NAFTA so it won''t anger the Canadians, ammenesty to illegals to make job hunting harder for Americans. John McCain. Mr NAFTA. Mr. North American Super Highway.
If you vote for John McCain this fall you should be shot in the head.

[timeisrite]

Today I have read ALL the comments left by everyone that wanted to argue over who is wrong (left) and who is right. America has be going down hill for some time and this is coming from a Proud American Born Statesman. As I was growing up I was raised in a home of proud auto workers that seen not only the good times but the bad also and the one thing I have noticed is the the economy has been good of the wealthy but bad for the middle class and the poor.

Really be honest, what we are experiencing is your fault and mine, every Americans fault, Republican, Democrat, and independent. We are the PEOPLE of the United States of America and it is OUR fault that the economy is failing. We JUST SIT and complain, We do NOTHING and expect everything to run smooth, it does not work that way. Either you voted or didn''t vote these people into congress even though you knew from the start that they never do what they promise, Its YOUR FAULT AMERICA. Get rid of the GOOD OLE BOYS & GIRLS and start over, If you cannot do this then there is no hope for the America we hold so dear.

[ontheleft]

''Priceless! The liberal media goes on and on about a "recession" and then when the economy actually GROWS''

An economy growing at 0.6% when the population is increasing by 2-3% might as well be a contracting economy. There aren''t enough jobs to go around now and it will only get worse as the recession is just beginning to hit the labor market. There aren''t too many people who will escape the effects of this recession.

[naucoming4u]

Once the Bush administration got into office, they decided to do something about that.

Posted by ontheleft at 07:58 PM : Apr 30, 2008
...........

All part of the secret energy policy meetings with ***(head) Cheney in early 2001.

[ontheleft]

'' So everyone who thinks Bush is not responsible, hold up your hands.''

Posted by RandyNason at 06:04 PM

Me here. A few years ago when the dollar accelerated its decline, Bush said he was not concerned. It has continued to go down ever since. Perhaps he wasn''t concerned because a low dollar is beneficial to oil. It hurts just about everyone else in this country.

His economic proposals yesterday were all about oil. Almost his entire administration came from the oil industry. In the late 1990s, oil was at record lows. Once the Bush administration got into office, they decided to do something about that.

[sistatee-2009]

Send a few more jobs to China and bring in more illegals. That ought to fix things.

[randynason]

The job of a sitting President is to act preventatively and take steps to ensure the equilibrium of the national economy. That said: Bush IS responsible.
Spending 1.5 trillion dollars on two wars has not helped, either. So everyone who thinks Bush is not responsible, hold up your hands.

[noloyalisti]

As soon as you say liberal media, you expose yourself as a conservative moron. The corporate media is owned by the war profiteers who are the biggest supporters of the party of death the Grand Oil Party (or is it Greasy Old Perverts?)

All but the "this is my story and I''m sticking to it crowd" knows we are in a deep recession that will only get worse until we the people stand up and take back the country from the fascists.

[arlt1627]

The economy is in the tank not because of bush but because of the housing crunch and credit crisis. I really wish you''''d people take an economics course. You are talking out of your behinds.

Posted by mudrose at 04:55 PM : Apr 30, 2008


Keep believing and preaching that that is the only factor....naive. Obviously that is the first trigger to this stumbling economy, but borrowing money to pay $10 billion a week in Iraq/Afghanistan is also devaluing the dollar.....lower the rates by the FED is the response for trying to slow inflation and further devaluing the dollar......its a combo platter out there and NOTHING is being done by Congress, the Pres, or big corporations to shore up our problems.....until we fix the underlying issues (outsourcing, oil demands, American lifestyle, real estate speculation, subprime lenders, and Wall Street speculators, NOTHING will change!!

[arlt1627]

Priceless! The liberal media goes on and on about a "recession" and then when the economy actually GROWS, they bury the story and have to put it in the worst light possible.
If Bush cured cancer the headlines would be, "Bush ignores AIDS"
If Bush invented a car that ran on water, the headlines would be, "Bush threatens water supply"
There is no low that the MSM media won''''t stoop to just to hand over this country to the socialists (I mean Democrats)

Posted by ritewingman at 05:21 PM : Apr 30, 2008

WOW!! You really believe that the corporate CEO bosses want Socialism in this country.....you''re take on the media is off the charts! Not gonna happen....I guess we all should ignore the fact that the FED just dropped rates for the 7th time since September to 2%. We have to borrow rebates for "just the heck of it" because the economy is doing ''so well!'' What an ignorant post this was. Maybe you''re not impacted (YET), but you likely will be soon! Wake up and smell the coffee called a recessed economy.

[irliberal]

Posted by ritewingman at 05:21 PM

Cry more please?