Alexa
  • Directory of Taiwan

Economic rebound slowed last quarter

Economic rebound slowed last quarter

The economic rebound last quarter turned out to be slower than first thought, one of the reasons unemployment is likely to stay stubbornly high this year.
The economy grew at a 3 percent annual rate from January to March, the Commerce Department said Thursday. That was slightly weaker than an initial estimate of 3.2 percent growth a month ago. The new reading, based on more complete information, also fell short of economists' forecast for stronger growth of 3.4 percent.
The reasons for the small downgrade: consumers spent less than first estimated. Same goes for business spending on equipment and software. And, the nation's trade deficit was a bigger drag on economic activity.
During normal times, growth in the 3 percent range would be considered healthy. But the country is coming out the longest and deepest recession since the Great Depression. So economic growth needs to be a lot stronger _ two or three times the current pace_ to make a big dent in the nation's 9.9 percent unemployment rate.
Economists say it takes about 3 percent growth to create enough jobs just to keep up with the population increase. Growth would have to be about 5 percent for a full year just to drive the unemployment rate down 1 percentage point.
After the last severe recession in the early 1980s, GDP grew at rates of 7 to 9 percent for five straight quarters and the unemployment rate dropped from 10.8 to 7.2 percent in 18 months.
Economists don't see that happening this year. In fact, growth in the first quarter was slower than at the end of last year. The economy grew at a 5.6 percent in the final three months of 2009. But economists had predicted that growth spurt would fade.
GDP measures the values of all goods and services _ from machines to manicures _ produced within the United States. It is the best measure of the country's economic health.
The National Association for Business Economics predicts moderate economic quarterly growth in the 3 percent range through the rest of this year.
The outlook means employers won't feel comfortable about bulking up their work forces.
Consumers increased spending at a 3.5 percent pace in the first three months of this year. Even though that was a notch less than the 3.6 percent growth rate initially estimated, it still marked the strongest spending in three years. Consumer spending was feeble in the final three months of last year, rising at only a 1.6 percent pace.
Although consumers are now helping to support the recovery, they aren't showing signs of spending lavishly as they usually do in the early stages of economic rebounds. High unemployment, stagnant wages and tight credit are just some of the forces restraining spending.
Business spending on equipment and software grew at a 12.7 percent pace in the first quarter, weaker than the 13.4 percent rate first reported. The pace of spending is still strong but the fact that the new estimate was a bit less robust than initially thought was a factor in the quarter's downgrade.
So was the trade deficit. It shaved 0.66 percent point off GDP, versus 0.61 percentage point in the government's first estimate. Exports actually rose even more than initially thought. But so did imports and that widened the trade gap.


Updated : 2021-05-09 07:47 GMT+08:00