Revised GDP and Other Data Point to Resilience
Solid consumer spending fueled stronger growth in the second quarter than previously estimated, the government said Thursday, and separate reports pointed to underlying strength in the nation’s economy.
Analysts said that although there were pockets of weakness, the U.S. economy was weathering the turmoil in Asia, Russia and elsewhere quite well, with few signs the expansion that began in the spring of 1991 was running out of steam.
The Commerce Department said the gross domestic product--the broadest measure of the economy--grew at a 1.8% annualized rate in the quarter, up from the 1.6% estimated a month ago, but still well below the 5.5% of the first quarter. It was the weakest quarterly growth figure in three years.
In a separate report, the department said orders for big-ticket manufactured goods jumped 1.6% in August, for a third straight monthly increase, pointing to resilience in manufacturing despite the global economic turmoil.
The Labor Department reported Thursday that the number of new unemployment claims fell last week to the lowest level since April. That is seen as a sign of continued strength in the job market and something that could buoy consumer spending in spite of the unsteady stock market.
“The U.S. economy continues to have a tremendous amount of resilience,” said economist Lynn Reaser at NationsBank Corp., adding that growth will probably pick up for the rest of the year, bolstered by a strong job market and rising auto production.
“Going forward, the numbers are going to be somewhat better than the second quarter, which was hurt by the General Motors strike, probably around 2.5% [growth] in the second half,” she said.
A long strike in June and July idled dozens of GM plants in North America, contributing to a sharp decline in production that helped slow economic growth.
Part of the jump in orders for durable goods last month came as GM plants started up again.
Aircraft orders were also strong. Excluding transportation, durable goods orders fell 2.1% last month, reflecting weak demand for electrical equipment and other products in Asia.
In its report, the Labor Department said new claims for unemployment compensation fell 8,000 to 292,000 last week, in a fresh sign that the job market continues to be strong enough to bolster consumer spending, which fuels two-thirds of the economy.
“Consumers have been just irrepressible,” said economist Cynthia Latta of DRI/McGraw Hill Inc. in Lexington, Mass. “And no wonder, since the job outlook is good, interest rates are low and pay increases have been substantial.” Latta predicated growth would be steady in the third quarter and edge up in the fourth quarter. She estimated there was a 1-in-2 chance that Federal Reserve policymakers will cut rates when they meet on Tuesday.
Fed Chairman Alan Greenspan signaled in congressional testimony Wednesday that he was ready to press for lower rates to try to keep global economic instability from spreading into the U.S.
In explaining the revisions to its second-quarter GDP figures, the Commerce Department said consumers spent more than had been estimated a month ago, and that trade was stronger.
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Durable Goods
New orders, in billions of dollars, seasonally adjusted:
August, 1998: $189.4 billion
* Source Commerce Department
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Gross Domestic Product
Percentage change from previous quarter, annualized rate:
1998 2nd quarter: +1.8%
* Source: Commerce Department
