The bruised economy limped through the first quarter, growing at just a 0. 6 percent pace as housing and credit problems forced people and...
WASHINGTON — The bruised economy limped through the first quarter, growing at just a 0.6 percent pace as housing and credit problems forced people and businesses alike to hunker down.
The country’s economic growth during January through March was the same as in the final three months of last year, the Commerce Department reported Wednesday.
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The statistic did not meet what economists consider a definition of a recession — which is a contraction of the economy. This means that although the economy is stuck in a rut, it is still managing to grow, even if slightly.
Many analysts had predicted the gross domestic product (GDP) would weaken a bit more, to a pace of just 0.5 percent, in the first quarter.
Earlier this year, some thought the economy would actually lurch into reverse during the opening quarter.
Now, they say that will likely happen during the April-to-June period.
“The economy is weak but not collapsing,” said Lynn Reaser, chief economist at Bank of America’s Investment Strategies Group.
“A recession can’t be ruled out, although the stars are not lined up at this point to definitively say one way or the other.”
Gross domestic product (GDP) measures the value of all goods and services produced within the U.S. and is the best measure of the country’s economic health.
Voters are keenly worried about the country’s economic problems and so are politicians — in Congress, in the White House and on the campaign trail.
White House press secretary Dana Perino said the administration was disappointed in the figures.
“This is nothing to crow about,” she said. “It is very slow growth, but it is growth nonetheless.”
Consumers — whose spending is vital to the country’s economic health — turned much more cautious, also restraining overall economic growth in the first quarter. Their spending rose at just a 1 percent pace.
That was down from a 2.3 percent growth rate and was the slowest since the second quarter of 2001, when the U.S. was suffering through its last recession. Shoppers did cut spending on such things as cars, furniture, household appliances, food and clothes.
Soaring energy and food prices are walloping people’s pocketbooks, leaving them with less to spend on other things.
The credit crunch also has made it harder for people to finance big ticket items, such as cars and homes.
And many homeowners watching their homes slump in value, also are feeling less wealthy and less inclined to spend.
Another report Wednesday, this one from the Labor Department, showed that workers’ compensation — including wages and benefits — grew 0.7 percent in the first quarter, the slowest pace in two years.
Many economists were expecting a 0.8 percent rise. The report suggests the weak labor market is making employers less generous with their compensation.
Businesses, meanwhile, reduced spending on equipment and software at a 0.7 percent pace, the most since the final quarter of 2006.
They cut spending on commercial construction at a 6.2 percent pace, the most since the third quarter of 2005.
However, growth in businesses’ inventories was a big force adding to GDP. That could reflect both stronger foreign demand for U.S merchandise and weaker domestic sales, analysts said.
Exports of U.S. goods and services, which increased at a 5.5 percent pace, also helped first-quarter growth. U.S. exports are being aided by the falling value of the dollar, which makes U.S.-made goods and services less expensive to foreign buyers.