WASHINGTON - The U.S. economy grew at a faster rate in the first quarter of this year than previously thought, the government reported yesterday, further muddying the question of whether or not the sluggish U.S. economy is in recession.
Between January and March, the U.S. economy grew by 0.9 percent, not the 0.6 percent projected a month ago, the Commerce Department said.
Normally, such a slight upward revision wouldn't merit much attention. But economists and policymakers are confounded by today's economy, which is being dragged down by a deep housing slump and soaring energy prices. Some indicators point to recession, while others suggest that the economy is continuing to grow despite stiff head winds.
"We're pleased that the number is higher than the original number. Inside the numbers, the shape ... is healthier than the first set of numbers," Commerce Secretary Carlos Gutierrez said in a telephone interview.
Gutierrez pointed to the revised numbers showing continued strong exports, healthier business investment than first thought and a reduction in business inventories, which were thought to have been making economic growth appear stronger than it actually was.
Also on the positive side, the Commerce Department reported Wednesday that orders for durable goods - big-ticket items such as cars and aircraft - declined less than expected. When transportation was excluded, durable goods orders rose 2.5 percent and pointed to a stronger economy than other indicators suggest.
Still, experts such as former Federal Reserve Chairman Alan Greenspan still think that a mild recession is probable this year. Financial analysts remain grim about the economic outlook, pointing to slumping consumer confidence and four successive months of job losses as signs of broader problems.
"Second-quarter growth now looks likely to be close to zero - we expect a small negative," said Nigel Gault, the chief U.S. economist for Global Insight, a forecaster in Lexington, Mass. "We expect some improvement in the third quarter, helped by stimulus payments, but then slower growth again in the fourth. The economy is far from out of the woods."
More than $150 billion worth of one-time tax rebate checks will have been sent to consumers by the end of July, and they're expected to provide a temporary boost.
Gutierrez said the rebates, combined with delayed benefits from steep cuts in interest rates by the Federal Reserve, should spark a stronger second half of 2008 for the U.S. economy.
Consumer spending grew 1 percent in the first three months of the year, but that's expected to fall sharply because of the recent jump in oil prices to more than $130 a barrel. Gasoline prices averaged $3.95 a gallon yesterday, according to the AAA Motor Club, up 35 cents from a month ago and 78 cents from a year ago.
As a result of high energy and food prices, consumer confidence slumped to a 16-year low, the Conference Board reported this week, as Americans fretted about the rising cost of filling their pantries and their gas tanks. Of concern to the Federal Reserve, consumer expectations about inflation for the next 12 months jumped sharply.
The stronger-than-expected first-quarter growth might prompt the Fed to begin raising interest rates again later this year because inflation remains on the high side of the Fed's comfort zone.