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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Susan Saline who wrote (32336)	7/28/2000 10:08:09 AM
From: Luce Wildebeest	Respond to of 50167

Friday July 28 9:34 AM ET Economy Accelerates in the Second Quarter By Glenn Somerville WASHINGTON (Reuters) - The U.S. economy picked up speed in the second quarter, defying expectations for a slowdown, but inflation was in check and consumer spending grew less vigorously, the government reported on Friday. Powered by brisk business investment and inventory-building, the nation's gross domestic product grew at an annual rate of 5.2 percent in the April-June period, accelerating from a revised 4.8 percent pace in the first three months of the year, the Commerce Department said. The surprising pickup in GDP was in sharp contrast to Wall Street economists' forecasts that it would slow to a 3.8 percent rate of growth in the second quarter, and kept alive fears that the inflation-wary Federal Reserve may opt for further interest rate rises in the months ahead. Inflation-sensitive U.S. Treasury bond prices fell on the stronger-than-expected data, while the dollar rose against key currencies. ``Fundamentally, the economy has not slowed as investors had hoped or the Fed requires,'' said economist Charles Lieberman of First Institutional Securities. ``It puts a tightening in August back on the table,'' he said, referring to the U.S. central bank's next policymaking committee meeting on Aug. 22. The keenly awaited report included revisions showing the performance of GDP, the broadest measure of total U.S. goods and services output, was even more sparkling over the past 3-1/2 years than was previously thought. Consumer Spending Slows Consumer spending, which fuels two-thirds of national economic activity, grew 3 percent in the second quarter, sharply slowing from 7.6 percent in the first quarter. Fed policymakers have cited the need to slow demand to keep inflation in check as they ratcheted interest rates up six times since mid-1999. Some elements of the report, especially signs that consumers might be curbing their spending, encouraged analysts. ``Although the overall number on GDP was very strong, it does appear that consumer spending is slowing a bit,'' which may help allay some of the Fed's concerns, John Canavan of Stone and McCarthy in New Jersey told Reuters Television. Prices remained in check as the personal consumption expenditure price gauge advanced at a slower 2.3 percent rate following a 3.5 percent gain in the first quarter. Commerce issued revised estimates of GDP from 1997 onward, using newer census and other data to paint a clearer picture of the economic expansion. It said GDP grew 4.4 percent in both 1997 and 1998, instead of 4.2 percent and 4.3 percent respectively, and confirmed that the economy grew another 4.2 percent last year, the same as previously thought. The revised data showed the economy, now in a record 10th year of unbroken growth, hit 2000 at an even faster stride than thought before. In the fourth quarter last year, GDP shot ahead at an 8.3 percent annual rate -- the strongest in nearly 16 years -- rather than the 7.3 percent rate estimated earlier. Piling It Up The government previously estimated that first-quarter GDP grew at a 5.5 percent annual rate. That was revised down to 4.8 percent. Businesses stockpiled goods vigorously as 1999 came to a close, fearing possible disruptions from the century date change when 2000 rolled around. During the second quarter, businesses kept investing briskly in new plant and equipment to boost production, raising spending at a 19.1 percent rate following a 21 percent advance in the first quarter. At the same time, they increased inventories at a $60.3-billion annual rate, close to twice the $36.6-billion rate in the first quarter, adding powerfully to growth as they built up stocks drawn down by strong spending in the first three months of this year. Government spending increased at a 6 percent rate in the second quarter after shrinking 1.1 percent in the first three months of the year.