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Strategies & Market Trends : Zeev's Turnips - No Politics

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To: Steve Lee who started this subject	4/27/2002 2:14:57 AM
From: JOHN A.	Read Replies (1) of 99280

Forbes has good news and bad news, which one first? Many private economists have pegged the end of 2001 as a time when the economy appeared to turn the corner to recovery and the latest GDP figures added weight to those assumptions. An abrupt slowdown in the pace at which firms pared back inventories of unsold goods added a hefty 3.1 percentage points to first-quarter GDP. Businesses cleared $36.2 billion worth of inventories from their shelves in the first three months of this year, a much smaller reduction than the $119.3 billion that firms unloaded in the fourth quarter. Consumer spending grew a healthy 3.5 percent. An 8 percent drop in spending on durable goods such as cars was offset by an 8.4 percent surge in purchases of nondurable items like clothes. Corporate spending on new plants and equipment fell, but its drop in the first quarter was smaller than those of other recent quarters. Business investment in structures, equipment and software fell 5.7 percent in the first three months of this year after it plunged 13.8 percent in the fourth quarter. The equipment and software component of business investment fell a minuscule 0.5 percent in the first quarter. Economists found the mildness of that drop heartening. The GDP figure did not alter expectations that the Fed will keep interest rates steady at its next meeting on May 7. The Fed, which chopped overnight interest rates to a 40-year low of 1.75 percent last year, is widely expected to begin nudging interest rates higher sometime later this year. But Fed officials have indicated that they want more information on the pace of growth in the current second quarter before taking action on rates. Tame inflation also may help stay the Fed's hand. The so-called PCE price index, which Greenspan tracks closely, edged up a mere 0.6 percent in the first quarter. Stripping out volatile food and energy prices, it rose just 0.8 percent. forbes.com

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