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Sluggish US economy expands by just 0.6 percent PDF Print E-mail
Thursday, 01 May 2008

The US economy expanded at a sluggish 0.6 percent annual pace in the first quarter, the government said Wednesday in its first estimate of gross domestic product, reports agency.

The Commerce Department report was slightly better than expected and came amid fears that the world's biggest economy might be headed for recession, generally defined as two consecutive quarters of declining activity.

The 0.6 percent growth rate was the same as in the fourth quarter of 2007. Consumer spending, the key driver of the economy, slowed to a 1.0 percent growth rate from 2.3 percent in the fourth quarter.

It was the weakest growth since 2001 for consumer activity. Growth was helped by growing exports and inventory building. Exports grew 5.5 percent after rising 6.5 percent in the fourth quarter.

Inventories added 0.81 percentage points to growth after subtracting 1.79 percentage points in the fourth quarter. Weakness in the housing market continued to drag down growth. Real residential fixed investment fell 26.7 percent in the first quarter after falling 25.2 percent in the fourth quarter.

Business investment outside housing fell 2.5 percent in the quarter, the biggest drop in four years, following a 6.0 percent increase in the prior quarter. Without the inventory adjustment, the economy would have seen a decline of 0.2 percent in the first quarter in a figure knonw as "real final sales."

A key price index linked to GDP fell to 3.5 percent from 3.9 percent, with core prices excluding food and energy rising at a 2.2 percent pace from 2.5 percent. The report represents the "advance" reading on GDP that will be revised twice in the next two months after more data is released, notably on trade.

Without adjusting for inflation, the report shows that GDP -- the market value of the nation's output of goods and services -- increased 3.2 percent to a level of 14.185 trillion dollars.

The report comes as the Federal Reserve meets to consider a further cut in interest rates after slashing three percentage points from its federal funds rate since September.

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