Cobra Rob

Seems to contradict Local board analysist Glens daily opinion....






WASHINGTON - 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.

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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.

The first-quarter's performance was the weakest since the final quarter of 2002, when the economy 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 growth rate 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 initally 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 may be tightening the belt on some 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 its 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.

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John Patton

yeah I saw that

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C17chief

What do they expect when the decent working class jobs continue to go away. I mean the top few % are making more then ever, and unemployment is ok, but that doesnt really mean a whole lot when 90% of the workforce is making less and less.

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jrsy5oh

Not to mention that all the jobs that were lost after 2001 were replaced with lower paying gov jobs as a band aid for the unemployment numbers. Many of those people have no way of significantly advancing either.

The money still keeps getting tied up in the top 10% while more and more incentives and tax breaks are being available for these people at the same time. They have so much to invest taht they can lean on the lower and middle class people they employ to make even more money.

Meanwhile it is like a cat fight to raise the minimum wage, make colleges cheper and school loans more available, and housing gets expontentially more expensive for the middle class and poor.

On top of this you have gas prices which are an exponentially higher tax on the middle and lower class than they are on the rich and things like public mass transit are not invested in and highways are.

The gains we did have in the last 4 years were so overshadowed by the % gains in virtually every other developed country's economies that it is laughable. I think Japan didn't out pace us because they had one of the biggest recessions in their history....way to go.

Hackker

He has been talking more about the stock market booming - which it has been. I've already hit my goal of where our portfolio should be at for November of this year.....6 months early.

Although I expect things to slow down or even decline a bit this summer. But stocks just keep chugging along.

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3:09 marathon in 2010, Boston in 2011, 50k ultramarathon in 2012, then on to a 50 mile ultramarathon when I turn 50. Replacement hip when I'm 51.


You have to be a moron to think they didn't see the recession coming.

2EFNFAST

US economy flounders; DOW surges to record high....nothing wrong with that

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BlackBeachGT

The economy usually lags behind the stock market. People and businesses will start to realize their gains from the market and it will help GDP numberd later in the year. I love all of the fearmongering and, OMG we are going into recession.

Bruse Wayne

Bring Clinton Back

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