03/28/2008

News / 4th-Quarter Data Confirms Frailty of the Broad Economy

WASHINGTON (AP) — Final Commerce Department statistics for the fourth quarter of 2007 indicated Thursday that the economy came close to sputtering out.

The department reported that the gross domestic product increased at a 0.6 percent annual pace from Oct. 1 through Dec. 31. The reading, unchanged from a previous update of the figures a month earlier, offered confirmation of how much the economy had weakened. In the third quarter of 2007, it grew at a 4.9 percent annual pace.

The gross domestic product measures the value of all goods and services produced in the United States and is considered the best general gauge of economic health.

Many economists expect growth in the current quarter to be even weaker, and a rising number say it may already be contracting. By strict definition, economic contraction for two quarters, or six months, constitutes a recession. The government will release its estimate of the gross domestic product for the first quarter late next month.

“The economy just kept its head above water” in the fourth quarter, said Nigel Gault, chief United States economist at Global Insight. “We think that G.D.P. will decline, albeit slightly, during the first half of 2008. The first-half outlook is bleak.”

In another report, the Labor Department said Thursday that fewer people signed up for initial unemployment benefits last week, though that did not change the broader picture of a deteriorating job market. Jobless claims fell by 9,000, to 366,000, a better showing than many economists had forecast. Still, unemployment is expected to rise this year.

Consumers, indispensable to economic vitality, increased their spending at a 2.3 percent pace in the fourth quarter. That was better than the 1.9 percent pace previously estimated, but a drop from the 2.8 percent pace in the third quarter.

Businesses, seemingly anxious about customers’ purchasing, sharply reduced their inventories of unsold goods. That shaved 1.79 percentage points off fourth-quarter output.

But sales of American goods and services to other countries grew at a 6.5 percent annual pace. Exports have been buoyed by the sinking value of the dollar, which makes American goods less expensive to foreign buyers.

An inflation measure linked to the gross domestic product showed that prices increased at a pace of 3.9 percent in the fourth quarter, sharply higher than the third quarter’s 1.8 percent.

So-called core prices — excluding food and energy — grew at a pace of 2.5 percent, up from 2 percent in the third quarter.

Source: http://www.nytimes.com/2008/03/28/business/28growth.html?_r=1&ref=business&oref=slogin

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