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Archive for Saturday, April 28, 2001

No stall for U.S. economy

First quarter growth registers at healthy 2 percent clip

April 28, 2001

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— The economy surprised the naysayers by turning in a solid growth rate of 2 percent in the first quarter double what had been expected for a period in which there had been fears a recession might be beginning.

The Bush administration called the rebound "nothing but good news." Private economists also found it encouraging but expressed concern that the recession threat was not over.

The advance in the gross domestic product in the January-March quarter was not only bigger than anticipated but also was double the 1 percent annual rate of growth registered in the last three months of 2000.

On Wall Street, the news lifted stocks. The Dow Jones industrial average gained 117.70 points to close at 10,810.05.

"We're back from the brink," said a hopeful Richard Yamarone, economist with Argus Research Corp. "The economy, however, remains fragile. Looking ahead, people shouldn't expect miracles. Economic growth will probably be weaker in the second and third quarters."

GDP is the total output of goods and services produced within the United States and is considered the broadest measure of the nation's economic health. The first-quarter figure, released Friday by the Commerce Department, marked the government's most up-to-date reading.

Hardy spending by consumers, especially on costly manufactured goods, such as cars and furniture, and an improved trade performance were major forces boosting first-quarter growth. That helped to offset weaknesses elsewhere, including a drop in business investment in computers and other equipment.

The Bush administration, which had been concerned that the economy could dip into recession in President Bush's first months in office, welcomed the pickup.

"Our 2 percent real growth rate in the first quarter is nothing but good news compared to what most people expected," said Treasury Secretary Paul O'Neill.

Earlier this year, Federal Reserve Chairman Alan Greenspan worried that economic growth might have stalled out, ending the country's record 10-year-long economic expansion. Others feared that economic output may have actually declined.

The Fed slashed interest rates four times this year to stave off recession and rejuvenate the economy. Even with the first-quarter bounce back, many economists believe the Fed will cut rates again when it meets May 15.

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