U.s. Economic Growth Falters

First quarter showing was the worst in more than four years as housing slump continues.

Construction workers frame a structure at the Toll Brothers Saguaro Estates development under construction in Scottsdale, Ariz. The economy nearly stalled in the first quarter, with growth slowing to a pace of just 0.6 percent.

AP photo

WASHINGTON — Economic growth skidded to a near halt in the first quarter, with the worst showing in more than four years raising concerns about how long the country’s sluggish spell will last.
The Commerce Department reported Thursday that gross domestic product increased by just a 0.6 percent pace in the January-through-March period, much weaker than estimated a month ago. Government statisticians slashed by more than half their first estimate of a 1.3 percent growth rate for the quarter.
The main forces behind the downgrade: the bloated trade deficit and businesses cutting investment in supplies of the goods they hold in inventories.
“We got close, but the economy did not slip under the waves in the first quarter,” said Joel Naroff, president of Naroff Economic Advisors.
What largely prevented the economy from going under: consumers, who showed an even bigger appetite to spend.
For nearly a year, the economy has been enduring a stretch of subpar economic growth due mostly to a sharp housing slump. That in turn has made some businesses act more cautiously in their spending and investing.
The economy’s 0.6 percent growth rate in the opening quarter of this year marked a big loss of momentum from the 2.5 percent pace logged in the final quarter of last year.
Federal Reserve Chairman Ben Bernanke says he doesn’t believe the economy will slide into recession this year, nor do Bush administration officials and many economists. But ex-Fed chief Alan Greenspan has put the odds at one in three.
In fact, many economists believe the first quarter will probably turn out to be the weakest point for the economy this year.
“I think the worst is behind us,” said Richard Yamarone, economist at Argus Research. “While we did have a miserable quarter in the first three months of the year, it doesn’t look like it will be repeated any time soon.”
The National Association for Business Economics predicts the economy will expand at a 2.3 percent pace in the April-to-June quarter. If that happens, the economy would have staged a rebound but would still be growing a pace below its average, which is around 3 percent to 3.25 percent, analysts said. Yamarone, however, thinks the economy is poised for a bigger bounceback in growth.