US economy grew in first quarter of 2008

April 30th, 2008 - 9:44 pm ICT by admin  

Washington, April 30 (DPA) The US economy grew by 0.6 percent in the first quarter of 2008, according to an initial estimate from the US government Wednesday, tempering fears that the world’s largest economy has tipped into a recession. The seasonally-adjusted annual rate is unchanged from the fourth quarter of last year, suggesting there has not been a further slowdown in growth as had been feared by many economists.

The Commerce Department attributed the real gross domestic product (GDP) rise to an increase in company inventories and in exports, amid a downturn in consumer spending and a further drastic dip in the housing market.

Excluding changes in private inventories, the economy contracted 0.2 percent in the first quarter after a 2.4-percent increase in the previous quarter.

The US Federal Reserve later Wednesday will consider whether to further lower interest rates in light of the new growth figures.

Economists expect a further quarter-point cut in its benchmark federal funds rate to 2 percent.

The US central bank had forecast small growth in the first three months of the year, though Fed Chairman Ben Bernanke last month acknowledged a recession - which is typically defined as two straight contracting quarters - was possible.

The GDP figures nevertheless mark a drastic slowdown in the last two quarters, after growth of 4.9 percent in the third quarter of last year.

GDP is the broadest available gauge of the economy and is usually used to calculate whether a recession exists. The initial GDP estimate will be revised in late May and June.

The report’s price index for gross domestic purchases - measuring prices paid by residents - rose 3.5 percent in the first three months of 2008 from 3.7 percent in the fourth quarter of last year.

Excluding volatile food and energy prices, the index climbed 2.2 percent from 2.3 percent.

Plunging housing prices that have fuelled a wider mortgage and banking crisis in the US had some economists predicting the US economy would contract in early 2008.

A Bloomberg survey had economists expecting a 0.5-percent increase in GDP, with estimates ranging from up 1.5 percent to a contraction of 0.8 percent.

Consumer spending, which accounts for about two-thirds of economic output, increased by 1 percent after growing 2.3 percent in the fourth quarter, the Commerce Department said.

Residential fixed investment - housing - plunged 26.7 percent in the quarter after falling 25.2 percent in the previous three months.

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