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Archive for Saturday, May 25, 2002

Recovery slower than expected

Economy grows at 5.6 percent rate in first quarter; home sales up

May 25, 2002

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— The economy sprang back from last year's recession with a little less oomph in the first quarter than previously thought, and analysts believe it has lost more steam since then.

The Commerce Department reported Friday that gross domestic product which measures the total output of goods and services produced within the United States grew at an annual rate of 5.6 percent in the January-March quarter.

Although that represented the strongest performance in the GDP in nearly two years, it was a slightly slower pace than the 5.8 percent growth rate estimated a month ago and was a bit weaker than many analysts were expecting.

"The recession is clearly over, but there are major questions about how this recovery will be through the rest of the year," said David Seiders, chief economist at the National Association of Home Builders.

One of the reasons first-quarter GDP was revised lower was that consumer spending was less brisk than thought. Consumers increased their spending at a rate of 3.2 percent, down from the 3.5 percent previously reported and a pullback from the red-hot 6.1 percent in the fourth quarter.

Less enthusiastic consumers may have helped to slow economic growth in the current quarter to around a rate of 3 percent to 3.5 percent, analysts said. That's still considered a respectable pace.

In another Commerce report, new-home sales rose 1 percent in April to a rate of 915,000 as buyers took advantage of low mortgage rates. In March, sales fell 3 percent.

Even with the downward revision in first-quarter GDP, the performance was remarkable given the economy shrank 1.3 percent in the third quarter of 2001. GDP grew at a below-par 1.7 percent rate in the fourth quarter.

The 5.6 percent growth rate in GDP marked the fastest pace since the second quarter of 2000.

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