US Economic Growth Rate Weakest for Four Years

02 July 2007

WASHINGTON DC: The US economy dragged its feet in the first quarter of 2007, growing by an unimpressive 0.7% and slower than at any time in the past four years.

The Commerce Department's revised figures were marginally better than its earlier prognostication of 0.6%, but analysts had been expecting 0.8% growth.

It was even more disappointing when compared with 2.5% growth during the previous three months. The continuing housing slump and consequent spending clampdown by businesses were blamed for below-par economic performance.

However, the quarter is likely to be the weakest economic point of this year. Forecasts for the second three month period remain robust, with analysts expecting GDP growth of 3.5%.

Consumers, invigorated by a healthy jobs climate, have been credited with preventing the economy from grinding to a complete halt during Q1. Their spending rose 4.2% for the second quarter in a row.

Inflation figures show that core prices - excluding food and energy - rose 2.4% in the first three months. That rate was higher than previous estimates and faster than the 1.8% pace in Q4.

The Federal Reserve is widely expected to keep interest rates at their current level of 5.25% as it expects inflation to fall in the coming quarters.

Data sourced from International Herald Tribune; additional content from WARC staff