The U.S. economy grew more than previously estimated in the first quarter as Americans shunned imports and exports climbed to a record.
The 0.9 percent gain at an annual pace in gross domestic product compares with an advance estimate of 0.6 percent, the Commerce Department said today in Washington. Fourth-quarter growth was 0.6 percent. Separate figures today showed the number of Americans continuing to receive jobless benefits rose to a four-year high this month.
"It's basically like an airplane at stall speed, just skimming above the water,'' Jeffrey Frankel, an economist at Harvard University who is a member of the panel that dates U.S. economic cycles, said in a Bloomberg Radio interview. "I wouldn't rule out going into a recession later in the year."
Trade remains the bright spot for an economy that is likely to slow this quarter as surging fuel and food bills and falling home values force consumers to cut back. The economy will expand just 0.1 percent this quarter as spending slows further, according to economists surveyed by Bloomberg this month.
"We are somewhere in the twilight zone between an expansion and a recession,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. "We will have a poor pace of growth through the year.''
First-time claims for unemployment insurance rose to 372,000 last week, higher than economists had forecast, from 368,000 the previous period, the Labor Department reported. Those continuing to receive benefits jumped to 3.104 million in the week ended May 17, the highest level since February 2004.
Stocks, Treasuries
Stocks rose, with the Standard & Poor's 500 index up 0.5 percent to close at 1398.26. Treasuries slid after benchmark 10- year note yields yesterday climbed above 4 percent for the first time since January. The yields were at 4.08 percent at 4:33 p.m. in New York, from 4 percent late yesterday. The dollar rose 0.9 percent to $1.5503 per euro.
Honeywell International Inc., the world's largest maker of airplane controls, said last week it is confident in its full- year forecasts as demand outside the U.S. remained robust. Record oil prices have boosted orders for refining equipment and building projects in the Middle East, India and China has pushed up sales of its energy conservation devices.
"This year is going to be another strong year in a more difficult environment,'' Honeywell's Chief Executive Officer David Cote said on May 19 at a conference in Florida.
Gains Abroad
Eaton Corp., the world's second-largest maker of hydraulic equipment, reaffirmed its full-year profit forecast on May 28 and projected international markets will grow as much as 6 percent. The company's U.S. markets will expand 2 percent to 3 percent this year.
Procter & Gamble Co., the world's largest consumer-products company, said last month that third-quarter profit rose on increased sales overseas and higher prices.
While a recession is often described as consecutive declines in GDP, the National Bureau of Economic Research, the official arbiter in the U.S., defines contractions as a ``significant'' decrease in activity over a sustained period of time.
The group says that in a recession, decreases would be visible in payrolls, production, sales and incomes, in addition to GDP.
"For that reason, the U.S. is probably already in a mild recession,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "The economy will be pretty flat on its back through much of this year.''
Feldstein on Recession
Harvard University economist Martin Feldstein, president of the NBER, today said the economy probably shrank last quarter.
"Virtually every indicator is heading down,'' Feldstein said in a Bloomberg Television interview. Still, there's ``a chance'' the U.S. won't go into a recession.
The Bush administration is betting the U.S. will keep growing as the economy benefits from the impact of tax rebates and seven interest-rate cuts by the Federal Reserve since September.
"We think that it will avoid a recession, Keith Hennessey, director of the White House National Economic Council, said in an interview with Bloomberg Television. "We think that growth is continuing in the second quarter'' and will strengthen in the second half of the year, he said.
Today's GDP report is the second of three estimates. The median forecast of 74 economists surveyed by Bloomberg News was for a 0.9 percent pace. Projections ranged from gains of 0.6 percent to 1.3 percent.
Growth Slowing
Following a 0.6 percent growth rate in the fourth quarter, the reading was the smallest six-month expansion rate in five years.
The trade deficit shrank to an annual pace of $480.2 billion, the smallest since the third quarter of 2002. Trade's contribution to growth jumped to 0.8 percentage point, four times more than previously estimated.
Consumer spending, which accounts for more than two-thirds of the economy, rose at a 1 percent annual rate in the first quarter, the same as estimated last month. The gain was the smallest since the 2001 recession.
The revisions also showed bigger gains in incomes than previously estimated, easing concern that spending will collapse.
Personal income increased at a 5.1 percent annual pace from October through December, compared with an initial projection of 4.2 percent. For the first quarter, income growth was revised up to 4.7 percent from 4.4 percent.
Income growth may slow in coming months as the labor market softens. The U.S. has lost jobs for four consecutive months this year, and payrolls may post another decline for May, according to the Bloomberg survey.
Inventories Drop
The gain in growth last quarter would have been even larger if not for a reduction in estimates for inventories. Companies cut stockpiles at a $14.4 billion annual rate, compared with an initial estimate of a $1.8 billion gain. The figures added 0.2 percentage point to growth, less than the previously estimated contribution of 0.8 percentage point.
A measure of total sales, which strips out stockpiles, was revised to a gain of 0.7 percent at an annual rate rather than a 0.2 percent drop. Sales rose at a 2.4 percent pace in the fourth quarter.
There are signs that demand is slowing even more. Auto sales in April slid to a 14.4 million annual rate, the lowest level since 1998, industry figures show. Spending this quarter will grow at a 0.5 percent pace, the smallest gain since 1991, according to the median estimate in a monthly Bloomberg survey.
Fed Forecasts
Fed policy makers last month trimmed their economic growth projections for this year by about 1 percentage point to 0.3 percent to 1.2 percent.
"A number of participants were of the view that financial headwinds would probably continue to restrain economic activity through much of next year,'' minutes of the Fed's April meeting showed last week.
Residential construction decreased at a 25.5 percent pace, less than previously estimated, though still the biggest drop since 1981.
Reports this month showed declines in home building will remain a drag on growth. Builders began work in April on the fewest single-family houses in 17 years.
The figures today also included a first look at corporate profits for the quarter. Earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, increased 0.3 percent to an annual rate of $1.57 trillion.
The 0.9 percent gain at an annual pace in gross domestic product compares with an advance estimate of 0.6 percent, the Commerce Department said today in Washington. Fourth-quarter growth was 0.6 percent. Separate figures today showed the number of Americans continuing to receive jobless benefits rose to a four-year high this month.
"It's basically like an airplane at stall speed, just skimming above the water,'' Jeffrey Frankel, an economist at Harvard University who is a member of the panel that dates U.S. economic cycles, said in a Bloomberg Radio interview. "I wouldn't rule out going into a recession later in the year."
Trade remains the bright spot for an economy that is likely to slow this quarter as surging fuel and food bills and falling home values force consumers to cut back. The economy will expand just 0.1 percent this quarter as spending slows further, according to economists surveyed by Bloomberg this month.
"We are somewhere in the twilight zone between an expansion and a recession,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. "We will have a poor pace of growth through the year.''
First-time claims for unemployment insurance rose to 372,000 last week, higher than economists had forecast, from 368,000 the previous period, the Labor Department reported. Those continuing to receive benefits jumped to 3.104 million in the week ended May 17, the highest level since February 2004.
Stocks, Treasuries
Stocks rose, with the Standard & Poor's 500 index up 0.5 percent to close at 1398.26. Treasuries slid after benchmark 10- year note yields yesterday climbed above 4 percent for the first time since January. The yields were at 4.08 percent at 4:33 p.m. in New York, from 4 percent late yesterday. The dollar rose 0.9 percent to $1.5503 per euro.
Honeywell International Inc., the world's largest maker of airplane controls, said last week it is confident in its full- year forecasts as demand outside the U.S. remained robust. Record oil prices have boosted orders for refining equipment and building projects in the Middle East, India and China has pushed up sales of its energy conservation devices.
"This year is going to be another strong year in a more difficult environment,'' Honeywell's Chief Executive Officer David Cote said on May 19 at a conference in Florida.
Gains Abroad
Eaton Corp., the world's second-largest maker of hydraulic equipment, reaffirmed its full-year profit forecast on May 28 and projected international markets will grow as much as 6 percent. The company's U.S. markets will expand 2 percent to 3 percent this year.
Procter & Gamble Co., the world's largest consumer-products company, said last month that third-quarter profit rose on increased sales overseas and higher prices.
While a recession is often described as consecutive declines in GDP, the National Bureau of Economic Research, the official arbiter in the U.S., defines contractions as a ``significant'' decrease in activity over a sustained period of time.
The group says that in a recession, decreases would be visible in payrolls, production, sales and incomes, in addition to GDP.
"For that reason, the U.S. is probably already in a mild recession,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "The economy will be pretty flat on its back through much of this year.''
Feldstein on Recession
Harvard University economist Martin Feldstein, president of the NBER, today said the economy probably shrank last quarter.
"Virtually every indicator is heading down,'' Feldstein said in a Bloomberg Television interview. Still, there's ``a chance'' the U.S. won't go into a recession.
The Bush administration is betting the U.S. will keep growing as the economy benefits from the impact of tax rebates and seven interest-rate cuts by the Federal Reserve since September.
"We think that it will avoid a recession, Keith Hennessey, director of the White House National Economic Council, said in an interview with Bloomberg Television. "We think that growth is continuing in the second quarter'' and will strengthen in the second half of the year, he said.
Today's GDP report is the second of three estimates. The median forecast of 74 economists surveyed by Bloomberg News was for a 0.9 percent pace. Projections ranged from gains of 0.6 percent to 1.3 percent.
Growth Slowing
Following a 0.6 percent growth rate in the fourth quarter, the reading was the smallest six-month expansion rate in five years.
The trade deficit shrank to an annual pace of $480.2 billion, the smallest since the third quarter of 2002. Trade's contribution to growth jumped to 0.8 percentage point, four times more than previously estimated.
Consumer spending, which accounts for more than two-thirds of the economy, rose at a 1 percent annual rate in the first quarter, the same as estimated last month. The gain was the smallest since the 2001 recession.
The revisions also showed bigger gains in incomes than previously estimated, easing concern that spending will collapse.
Personal income increased at a 5.1 percent annual pace from October through December, compared with an initial projection of 4.2 percent. For the first quarter, income growth was revised up to 4.7 percent from 4.4 percent.
Income growth may slow in coming months as the labor market softens. The U.S. has lost jobs for four consecutive months this year, and payrolls may post another decline for May, according to the Bloomberg survey.
Inventories Drop
The gain in growth last quarter would have been even larger if not for a reduction in estimates for inventories. Companies cut stockpiles at a $14.4 billion annual rate, compared with an initial estimate of a $1.8 billion gain. The figures added 0.2 percentage point to growth, less than the previously estimated contribution of 0.8 percentage point.
A measure of total sales, which strips out stockpiles, was revised to a gain of 0.7 percent at an annual rate rather than a 0.2 percent drop. Sales rose at a 2.4 percent pace in the fourth quarter.
There are signs that demand is slowing even more. Auto sales in April slid to a 14.4 million annual rate, the lowest level since 1998, industry figures show. Spending this quarter will grow at a 0.5 percent pace, the smallest gain since 1991, according to the median estimate in a monthly Bloomberg survey.
Fed Forecasts
Fed policy makers last month trimmed their economic growth projections for this year by about 1 percentage point to 0.3 percent to 1.2 percent.
"A number of participants were of the view that financial headwinds would probably continue to restrain economic activity through much of next year,'' minutes of the Fed's April meeting showed last week.
Residential construction decreased at a 25.5 percent pace, less than previously estimated, though still the biggest drop since 1981.
Reports this month showed declines in home building will remain a drag on growth. Builders began work in April on the fewest single-family houses in 17 years.
The figures today also included a first look at corporate profits for the quarter. Earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, increased 0.3 percent to an annual rate of $1.57 trillion.
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