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AP: Economy Picks Up “Slightly” In First 1/4

From a distraught Associated Press:

Economy’s growth picks up slightly in first quarter

By JEANNINE AVERSA, AP Economics Writer

WASHINGTON – 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.

The new reading on gross domestic product, released by the Commerce Department on Thursday, was an improvement from the government’s initial growth estimate for the January-to-March quarter as well as the economy’s performance in the final quarter of last year. Both periods were pegged at a 0.6 percent growth rate…

The first-quarter performance matched analysts’ forecasts and offered a somewhat encouraging sign because it showed the economy was still growing at that time. The figure didn’t meet a definition of recession, which under a rough rule is two straight quarters of shrinking GDP, and might raise hopes the country can dodge a full-blown downturn.

Fallout from the housing crisis continued to be a big drag on overall economic growth

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.

“Consumers are hurting,” said Ken Mayland, president of ClearView Economics

Looking ahead, top forecasters at the National Association for Business Economics predict the economy will eek along at a 0.4 percent growth rate during the April-to-June period, which is expected to be the weakest quarter of the year. Growth should pick up to a 2.2 percent pace in the third quarter, energized by the Fed’s powerful series of rate reductions and billions of dollars worth of tax rebates flowing into the hands of Americans from Uncle Sam…

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 economic slowdown, will be reluctant to bulk back up until they feel certain the economy’s recovery will be enduring…

Looking forward, inflation pressures could get worse given surging food and energy prices. Oil prices, which have racked up a string of record highs, are hovering above $131 a barrel. Gasoline prices have marched higher, too, moving closer to $4 a gallon nationwide.

Those high prices are a double-edged sword for the economy. They can put a damper on growth and also can spread inflation if they force companies to boost their prices.

So much for the “recession” we were in the middle of, eh?

And yet the AP’s economic expert, Ms. Aversa, still manages to find the dark cloud surrounding the silver lining.

Things still could get worse.

Keep the hope alive, Jeannine.

This article was posted by Steve on Thursday, May 29th, 2008. Comments are currently closed.

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