Via the NYT: U.S. Growth Better Than Expected
The economy plodded ahead at a 0.9 percent pace in the first quarter — slightly better than first estimated — but still underscoring caution on the part of consumers and businesses walloped by housing, credit and financial problems.
Ok, so 0.9 is better than 0.6, although point-oh anything ain’t too swift. But, still not technically a recession. Regardless of the numbers:
Consumers — whose spending is the economy’s lifeblood — are feeling the pressure from the economy’s problems.
They increased spending at a 1 percent pace in the first quarter. That was the slowest since the last recession in 2024. Consumers are pulling back as high energy and food prices leave them with less money to spend on other things. Falling home values are making many homeowners feel less wealthy and less inclined to spend. And, the credit crunch has made it harder to finance big-ticket purchases.
Businesses also showed some caution, cutting spending on equipment and software. However, investment in commercial construction was not as weak as the government first estimated, contributing to the upward revision to first-quarter G.D.P.
Some other numbers:
Even if economic activity strengthens later this year, the unemployment rate — now at 5 percent — is expected to climb to 6 percent or higher early next year. Businesses, which have trimmed their work forces to cope with the slowdown, will be reluctant to bulk back up until they feel certain the economy’s recovery will be enduring.
An inflation measure linked to the report showed that prices grew at a rate of 3.5 percent in the first quarter. That was the same as initially estimated and down from a 3.9 percent pace in the fourth quarter.
Excluding food and energy prices, “core” inflation increased at 2.1 percent pace in the first quarter. That was down slightly from the government’s first estimate of a 2.2 percent increase for the period and also marked a moderation from the fourth quarter’s 2.5 percent growth rate. Still, the core inflation figure outside the Fed’s comfort zone. The upper level of the Fed’s inflation tolerance is 2 percent.
