Economy Grew at Anemic 1.6 Percent [vs 2.3% estimate]

Reuters ^ | 4-25-03 | Reuters

[GraniteStateConservative]

WASHINGTON (Reuters) - The U.S. economy hobbled along at a weaker-than-expected pace in the first quarter as the war in Iraq and severe winter weather took a toll on spending and investment, a government report showed on Friday.

U.S. gross domestic product, the broadest measure of the economy's health, grew by an anemic 1.6 percent in the first three months of the year, the Commerce Department said. That was a bit faster than the 1.4 percent growth rate recorded in the fourth quarter of last year, but it fell well short of the revival in growth some economists had been hoping to see in this report.

U.S. economists in a Reuters survey had expected a 2.3 percent rise in GDP.

Consumers, who were nervous in the run-up to the March 20 start of the war against Iraq, spent cautiously. Their spending increased a mere 1.4 percent in the first quarter, the weakest gain since the second quarter of 2001 -- in the middle of the 2001 recession. Spending decelerated from a 1.7 percent growth rate in the fourth quarter of 2002.

A pullback in car sales accounted for much of the weakness. Also, anecdotal reports have suggested that harsh winter weather kept consumers from the shopping malls in some parts of the country during February and early March.

Business investment in new plants and equipment proved to be surprisingly weak, contracting by 4.2 percent in the first quarter following a 2.3 percent rise in the fourth quarter. Spending on equipment and software fell by 4.4 percent.

One surprise in the report was a 1.5 percent decline in defense spending that came even as the Pentagon was sending thousands of troops and loads of equipment to the Middle East to gear up for the war. Commerce said it could not isolate the exact impact of war spending within the GDP accounts. However, it did point out that weaponry used in the war would have been counted as defense spending only at the time of production and delivery, not when used. Weapons drawn from existing inventories would not necessarily add to spending.

Underlying inflation in the U.S. economy was extremely muted. The closely watched inflation gauge, the PCE price index, rose 2.8 percent in the first quarter. But stripping out volatile food and energy costs, it inched up only 0.9 percent.

[ladtx]

Reuters did its best to put a sour face on this report of growth in the economy.

[ladtx]

It's like saying. Hmmm I made $100,000 last year, I expected to make $102,300 this year but only made $101,600. I think we're picking fly crap out of the pepper here.

[Brian S]

Some more interesting numbers to watch for this morning:

The Commerce Department is due to release its report on new home sales at 10:00 a-m Eastern time.

The University of Michigan releases its report on consumer sentiment around 9:45 a-m Eastern time.

Both of these numbers are expected to show positive signs for the economy. They damn well better!

[The Wizard]

very well said

[Moonman62]

The problem with that analogy is that the economy must produce jobs as well as income. If the economy's income growth is mostly from government growth and productivity gains, then it's fairly simple to predict future social and economic problems.

[Moonman62]

If a Democrat were president with these kind of economic numbers, I doubt the reviews would be so apologetic and optimistic.

[ladtx]

Apparently the growth was not from government growth if the government spending numbers are an indicator with 1.5% decline. Granted, there is a softness in job availability, but overall there was still growth and things are not as bad as reuters has tried to paint.

[Non-Sequitur]

On the other hand, if market analysts expected a company to earn $2.30 per share and it earned only $1.60 you would see it's stock price drop through the floow. Depends on which business analogy you want to use.

[RussianConservative]

Exactly. It can be argued most growth came from 80+ billion spent on the war. But long term, debt spending means a diminished money supply for loaning, higher interest rates and slower corporate growth.

[ladtx]

Not necessarily if it made $1.00 per share last year. Growth is growth no matter how you cut it.

[RockBassCreek]

1.6% GROWTH!!

That means that the glass was TOTALLY FULL!

And there was extra that overflowed.

In a democratic administration reuters, the alphabet media liberals, and all the demrat papers would be trumpeting huge success! And that's a fact.

[FITZ]

Hmmm I made $100,000 last year, I expected to make $102,300 this year but only made $101,600.

But what is the growth in taxes and government spending on social programs? The federal government will have to help bail out states like California and Texas where poverty is increasing at rapid rates ---spending on handout programs is quite a bit up. Medicaid and Medicare are taking us to disaster.

[ladtx]

...spending on handout programs is quite a bit up.

Very true. Once this type of spending goes up it is near impossible to bring down without looking like a heartless, pitiless, evil uncompassionate conservative.

[habs4ever]

Ah, but remember, the economy can't afford a broad based tax cut as it "costs" too much...

[familyofman]

"1.6% GROWTH!!
That means that the glass was TOTALLY FULL!"

I think you are mistaken - 1.6% growth will lead to higher unemployment and mor depressing economic news for W. To get the economy on a better footing economic growth will need to pickup to at least 3%.

This is a "normal" type of release from the news services which states government statistics, with analysis provided by various Wall St. economists. They are not political documents, although the numbers usually get spun by everyone that wants to prove a point.

[RockBassCreek]

neil cavuto agrees with me

[familyofman]

"neil cavuto agrees with me"

That's good. Brian Westbury & the Bush Administration agrees with me. That's why the tax cut program is needed - to help facilitate economic growth.

[Dave S]

It's like saying. Hmmm I made $100,000 last year, I expected to make $102,300 this year but only made $101,600. I think we're picking fly crap out of the pepper here.

Bullshit. 1.6% growth is anemic whether its compared to a "hoped for" 2.3% or a more normal rate of 3.5 - 4.5%. A 1.6% growth rate is not enough to get companies back to hiring employees or investing for the future. BTW, that 2.3% hoped for was putrid growth and would have generated a negative article as well.

Me think you are so blinded by party concerns that you are oblivious to reality. Take off the blinders.

[Dave S]

Granted, there is a softness in job availability, but overall there was still growth and things are not as bad as reuters has tried to paint.

Apparently you still have a job. Maybe after your company downsizes or your kid cant find a job out of school, you will feel different about 1.6% growth.