Economy Nearly Stalls in 1st Quarter

Economic growth nearly ground to a halt in the first quarter according to preliminary data from the Bureau of Economic Analysis. GDP grew at a very anemic 0.6% annual rate for the first quarter of 2007.

The down turn is due to an upturn in imports and downturns in exports, government spending personal consumption expenditures for non-durables.

The deceleration in real GDP growth in the first quarter primarily reflected an upturn in imports, downturns in exports and in federal government spending, and a deceleration in PCE for nondurable goods that were partly offset by an upturn in equipment and software, a smaller decrease in residential fixed investment, accelerations in PCE for durable goods and in PCE for services, and a smaller decrease in private inventory investment.

More here.

For nearly a year, the economy has been enduring a stretch of subpar economic growth due mostly to a 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 says he doesn’t believe the economy will slide into recession this year, nor do Bush administration officials and many economists. But ex-Fed chief Alan Greenspan has put the odds at one in three.

In fact, many economists believe the first quarter will probably turn out to be the weakest point for the economy this year.

And this is some possible good news,

Fewer people signed up for unemployment benefits last week, the Labor Department reported. New filings dropped by 4,000 to 310,000. That suggests the employment climate is weathering well the economy’s sluggish spell.

Still, keep in mind that unemployment/employment is a lagging indicator.

Update: This article notes that the growth rate is the worst since 2002. Back in 2002 economic growth was a meager 0.2% in the fourth quarter. But before people think I’m being too pessimistic, the economy did indeed rebound from that and grew at a rate of well over 3% for 2003. And most economist think the economy will rebound here as well.

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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.