What deficit? Bush recovery from Clinton recession gallops ahead:
Economy Surged 5.8% in 1st Quarter
As Businesses Slowed Inventory Cuts
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
The U.S. economy grew at a sizzling 5.8% annual rate in the first quarter, rocketing back after last year's recession and the terror attacks.
After limping through the last six quarters, gross domestic product -- the broadest measure of the economy's health -- posted its strongest showing since the final quarter of 1999, the Commerce Department reported Friday.
The latest GDP report reinforced the view that the country not only emerged from a recession that began in March 2001 but that the downturn will probably go down as the mildest in history.
The economy's sizzling first-quarter performance is especially remarkable given that the GDP shrank at a 1.3% rate in the third quarter of 2001. The economy grew at a 1.7% rate in the fourth quarter.
Economists' predictions of first-quarter GDP varied widely, according to a survey by Thomson Global Markets. On average the forecast was for a 5% rise, but predictions ranged from 3.5% to 6%.
The jump in GDP was driven largely by businesses eased off on paring inventory. Businesses also slowed their cuts to spending, and consumer spending -- a key component of economic growth -- remained healthy.
Business inventories fell just $36.2 billion in last quarter after falling a record $119.3 billion in the fourth. The change added 3.1 percentage points to GDP.
Friday's report also showed that businesses began shedding their reluctance to spend. Business investment, which has been dropping for more than a year, fell once again. But the 5.7% reduction was much milder than the 13.8% plunge in the fourth quarter. And spending on equipment and software declined by only 0.5% after sharper drops in previous quarters.
Consumer spending, which accounts for two-thirds of overall economic growth, rose at a 3.5% annual pace in the first quarter, down from the strong 6.1% pace in the fourth quarter. Fourth-quarter spending had been driven largely by temporary financing promotions from auto makers.
Spending on durable goods in the first quarter, which includes autos, fell by 8%. That was offset by an 8.4% gain in spending for nondurable goods such as clothing and food, as well as a 3.8% rise in spending for services. Home purchases jumped 15.7%.
The report also showed that inflation continued to remain in check. The price index for personal consumption, a measure watched closely by Fed policy makers, rose by 0.6% after advancing 0.8% in the fourth quarter. The chain-weighted price index for gross domestic purchases increased just 0.7% after a 0.5% rise the previous quarter.
Updated April 26, 2002 9:06 a.m. EDT |
