GDP Growth Slow, But Still Not A Recession

Bolstered By The Weak Dollar, Exports Keep Economy Creeping Along In The First Quarter

(AP)  The U.S. economy plodded ahead at a 0.9 percent pace in the first quarter - slightly better than first estimated - but still underscoring caution on the part of consumers and businesses walloped by housing, credit and financial problems.

The new reading on gross domestic product, released by the Commerce Department on Thursday, was an improvement from the government's initial growth estimate for the January-to-March quarter as well as the economy's performance in the final quarter of last year. Both periods were pegged at a 0.6 percent growth rate.

Gross domestic product, or GDP, measures the value of all goods and services produced within the United States.

The first-quarter performance matched analysts' forecasts and offered a somewhat encouraging sign because it showed the economy was still growing at that time. The figure didn't meet a definition of recession, which under a rough rule is two straight quarters of shrinking GDP, and might raise hopes the country can dodge a full-blown downturn.

Fallout from the housing crisis continued to be a big drag on overall economic growth.

Builders slashed spending on housing projects by 25.5 percent, on an annualized basis, in the first quarter. That was the most in 27 years.

Consumers - whose spending is the economy's lifeblood - are feeling the pressure from the economy's problems.

They increased spending at just a 1 percent pace in the first quarter. That was the slowest since the last recession in 2001. Consumers are pulling back as high energy and food prices leave them with less money to spend on other things. Falling home values are making many homeowners feel less wealthy and less inclined to spend. And, the credit crunch has made it harder to finance big-ticket purchases.

Businesses also showed some caution, cutting spending on equipment and software. However, investment in commercial construction wasn't as weak as the government first estimated, contributing to the upward revision to first-quarter GDP.

One of the bright spots keeping the economy afloat in the first quarter was export growth. Exports grew at a 2.8 percent pace, although that was not nearly as much as first estimated, they still were a force for GDP growth. The falling value of the U.S. dollar has made U.S. exports less expensive to foreign buyers.

In other economic news, more people signed up for jobless benefits last week, the latest sign of softness in the employment market. The Labor Department said new applications filed for unemployment insurance rose by 4,000 to 372,000 last week. The increase left claims slightly higher than the 370,000 level that economists were expecting.

Looking ahead, top forecasters at the National Association for Business Economics predict the economy will creep along at a 0.4 percent growth rate during the April-to-June period, which is expected to be the weakest quarter of the year. Growth should pick up to a 2.2 percent pace in the third quarter, energized by the Fed's powerful series of rate reductions and billions of dollars worth of tax rebates flowing into the hands of Americans from Uncle Sam.

The Bush administration and the Federal Reserve also are hoping for economic rebound in the second half of this year. That - along with inflation concerns - is why the Fed has signaled it isn't inclined to lower rates further.

Even if economic activity strengthens later this year, the unemployment rate - now at 5 percent - is expected to climb to 6 percent or higher early next year. Businesses, which have trimmed their work forces to cope with the economic slowdown, will be reluctant to bulk back up until they feel certain the economy's recovery will be enduring.

An inflation measure linked to the GDP report showed that prices grew at a rate of 3.5 percent in the first quarter. That was the same as initially estimated and down from a 3.9 percent pace in the fourth quarter.

Excluding food and energy prices, "core" inflation increased at 2.1 percent pace in the first quarter. That was down slightly from the government's first estimate of a 2.2 percent increase for the period and also marked a moderation from the fourth quarter's 2.5 percent growth rate. Still, the core inflation figure is outside the Fed's comfort zone. The upper level of the Fed's inflation tolerance is 2 percent.

Looking forward, inflation pressures could get worse given surging energy prices. Oil prices, which have racked up a string of record highs, are hovering above $131 a barrel.

[iphyt4u]

Are we really supposed to believe the spin that comes out of the Bush administration. $800 billion spent in a far off country because they have weapons of mass destruction...ooops...over 4,000 dead, and guess what...no weapons found.

[titanic03-2009]

Good post omega39, I forgot about our inventories being that high. But yet we are still dependant on overseas crude.

[omega39-2009]

The oil can be blamed on nutjobs and environmentalist trying to safe everything in this country. Tap our oil supply and no oil shortfalls.

Posted by titanic03

Oil is the problem in this economy and we have $130 a barrel oil because of a provision that was slipped into legislation on over the counter energy contracts at Enron''s behest. Oh and just so you know, oil inventories are at an 8 year high, US gasoline consumption has dropped 5.8% and oil companies have reduced refining capacity from 89 to 85% to try and maintain prices.

[titanic03-2009]

Yes, let''s blame the economy on Bush. Anyone care to look at the housing market and who got us into this? Being in construction it''s the builders/lenders. It had nothing to do with Bush! You take away the housing market and the economy is right where it should be, minus the oil. The oil can be blamed on nutjobs and environmentalist trying to safe everything in this country. Tap our oil supply and no oil shortfalls.

[terrapin78]

AHA Liberals! Your dreams of a recession are once again thwarted by the free market of Jesus.

Posted by gopsoccermom at 01:55 PM : May 29, 2008

Leave Jebus out of this.

[hdinsight]

Milk is up 15% from last year, chicken up 7% from last year, a tank full of gas is $40-$60. Americans are still spending, it''s just not going as far.

Any information regarding economic growth coming from the Bush administration should be taken with a grain of salt. That is, if you can afford a grain or two.

[gopsoccermom]

AHA Liberals! Your dreams of a recession are once again thwarted by the free market of Jesus.

[trillion1]

According to the rightwing I have have more money to spend than I thought I did and my constantly rising cost of living is just a illusion. Boy, that''s a relief

[walt1944-2009]

The Great Emperor Bush II is somewhat pleased that the economy is still growing, although at a snail''s pace. This news, "suspect" since it comes from a government agency, lends some sort of credibility to the Great Emperor''s claims that "there ain''t no recession, just a "slowdown""!

Exports, supposedly, helped the economy crawl along, but one wonders what could have been exported since the USSA doesn''t make anything! The only goods that could have been exported are produce and natural resources, which would explain why the Great Emperor wants to get rid of the National Park system and turn all government parks over to industry!

The Great Emperor has high expectations for the 2nd quarter numbers since many of us will have gotten our stimulus checks and, like dutiful citizens, will have gone out and spent the thing immediately on hard goods built in China and/or India, instead of trying to save money like the Bushies should be doing!

SIG HEIL, BUSH!!!!
sig heil, DEFINITELY MORE OF THE SAME, McCain!!!!

[omega39-2009]

The stimulus checks are working !!!

Posted by blackwater66

Since these are first quarter estimates and the first stimulus payments didn''t go out until the middle of Q2, your statement is absurd.

[blackwater66-2009]

The stimulus checks are working !!!

[ubrew12]

Its not a recession unless you''re a noncorporate ''person''. Maybe you''re one of those old, original ''persons'', called **** sapiens. In which case, you''re probably headed for extinction anyway...

[omega39-2009]

The Bush lovers are a hoot, hooray, hooray, the economy grew by .9%. Meanwhile, the GDP in China (you know, where they send all the well paying jobs) is growing at around 10%.

[stn_sage]

The figure didn''t meet a definition of recession, which under a rough rule is two straight quarters of shrinking GDP...(fm story)

1. This is but ONE factor to consider---of many---when it comes to deciding whether or not we''re in a recession!

2. This figure is an estimate---which is probably purposively overly positive! In all likelihood, it will be revised downward in a few weeks from now!

3. How many times has this administration been accurate in it''s forecasts? Answer: almost never!

4. How many times has it lied to the public to achieve a political aim? Answer: OFTEN!

5. The vast majority of indicators are very bad and many are getting WORSE! Pt: We''re in a recession.

6. Believe what you see & experience and NOT all the rosy, ''everything''s OK'' stories in the press. Things are getting a lot worse for a lot of people!

7. After 7 1/2 years of the Bush administration, anyone who believes we''re NOT in a recession is a fool or an idiot or at least extremely GULLIBLE!

8. This story is more about maintaining the loyalty and spirit of rightwing nutjobs, and minimizing the loss of Republicans who are abandoning that party, than it is about a ''recovering'' economy!

[bikerb54]

I guess if you pay the media enough kick-back from the oil companies, administration lobbyists and Haliburton, you can make anything look on the positive side. How about we ask the truckers, minimum wage workers, single parents and every other blue collar worker struggling to make it, ARE WE IN A RECESSION????

[bgwinnett]

I wonder how those statistics were manipulated to produce a positive number.

Posted by samrensho at 10:15 AM : May 29, 2008

The answer is inflation, which is really at 12% if you measured it how we used to 25 years ago. That would also mean GDP growth being negative by 2% for 2007, if calculated by using the real CPI rate.

[one-american]

It is quite apparent that the "recession" the liberal media has been trying to foist upon the American public is -- a lie.

Of course, this makes the liberal Bush-bashers turn inside out.

How fun.

[Gary Kempf]

Excluding food and energy prices, "core" inflation increased at 2.1 percent pace in the first quarter. That was down slightly from the government''s first estimate of a 2.2 percent increase for the period and also marked a moderation from the fourth quarter''s 2.5 percent growth rate. Still, the core inflation figure is outside the Fed''s comfort zone. The upper level of the Fed''s inflation tolerance is 2 percent.

Its funny how the system always excludes the very things that shows a recession.... Or at the very least killing the economy....

[terrapin78]

I don''t believe anything that comes out of anyone or anything involved with this absolutely corrupt mis-Administration!

[samrensho]

I wonder how those statistics were manipulated to produce a positive number.