Economic Growth Slows

First quarter economic growth was quite slow at 1.3%. This is quite low growth and the article notes it is the lowest in four years.

The first-quarter GDP figure was the weakest since a 1.2 percent pace registered in the opening quarter of 2003. GDP measures the value of all goods and services produced within the United States and is considered the best barometer of the country’s economic fitness.

Now while this is not good news it isn’t necessarily bad either since the economy was out of recession in 2003 and growth picked up again. In fact, this is what some forecasters are predicting will happen (e.g. James Hamilton).

Further, this could be good news in terms of interest rates and future increases. The Fed might decide that such increases are unwarranted due to the anemic growth. So, like James Hamilton, the emoticon for the economic outlook is neutral (click the link for an explanation).

FILED UNDER: Economics and Business,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Steve, sluggish growth plus inflation fears could mean the 70’s all over again. Do you see stagflation in the future?

  2. Steve Verdon says:

    No, I don’t think that is likely. Alot was learned about that phenomena back in the 70s.

  3. Minor quibble, you refer in your first sentence to “fourth quarter economic growth” when I think you meant first quarter.

    Also, for what ever reason, economic growth does not seem to be consistent. For example the 1.2 in 03Q1 was followed by 3.5 in 03Q1 and 7.5 in 03Q3 followed by 2.7 in 03Q4. Likewise, starting in 05Q3, we saw 4.2, 1.8, 5.6, 2.6, 2.0, 3.5. So in 2006 we ended up with an annual 3.4 GDP (not stellar, but not bad and better than 2005) despite a disappointing 06Q3.

    So while a 1.3 doesn’t make me jump for joy, I will wait for a bit more context.

  4. Steve Verdon says:

    Well the additional context is that the housing sector is hurting. Auto manufacturers are hurting, at least the U.S. ones. Oil prices and gasoline prices are again pretty high. These things all put a dampener on the economy. Is it enough for a recession, doesn’t look like it right now, but lower growth for the next quarter or so, probably.