U.S. Economy Grows Very Slowly
Kurt Brouwer January 30th, 2008
The Commerce Department announced its preliminary numbers for economic growth in the fourth quarter and they were very slow — on par with the first quarter of 2007.
U.S. Economy: Growth Slows As Housing, Spending Cool (Bloomberg, January 30, 2008, Shobhana Chandra)
‘The U.S. economy teetered on the edge of a recession in the fourth quarter as home construction fell the most in 26 years and Americans cut back on spending.
Gross domestic product increased at an annual rate of 0.6 percent, down from 4.9 percent in the prior three months, the Commerce Department said today in Washington. The pace of growth was half that forecast in a Bloomberg News survey and the slowest since the first quarter of last year…
We all knew fourth quarter economic growth would be very slow, however this number — 0.6% — is slower than I expected. The ironic part is that this a book-end year. We had a very slow first quarter with growth of 0.6% and a very slow fourth quarter, but the second and third quarters were very strong 3.9% and 4.9% respectively. The article continues:
“The economy is still growing, but it’s not growing fast enough,” said Mark Vitner, senior economist at Wachovia Corp. in Charlotte, North Carolina. “The Federal Reserve is going to go half a point today.”
The economy was forecast to expand at a 1.2 percent pace, according to the median estimate of economists. In addition to the slump in housing, the economy was hobbled by a drop in inventories, which may reflect concern over the outlook for consumer spending.
For all of 2007, the economy expanded 2.2 percent, the least in five years, to $11.6 trillion after adjusting for inflation.
“We’re not happy with the number,” Commerce Secretary Carlos Gutierrez said in an interview with Bloomberg Television after the report. “We need a booster shot before the economy gets sick,” he added, referring to a stimulus package lawmakers are considering in Congress…’
As we go further into the New Year, it will be fascinating to see how this plays out. So far, this isn’t a recession, just slow growth. The housing industry is clearly in a severe slump and though the worst may be behind us, housing will not contribute much to growth in 2008. The key will be to see how business spending and investment go as well as how we do on job growth.
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