US economy slows further

The news on the US economy yesterday was not good. GDP growth was down, consumer confidence was down, and inflation was up. Reuters sums it up.

Gross domestic product or GDP, which measures total goods and services output within U.S. borders, increased at a weaker-than-expected 1.3 percent annual rate in the three months from January through March...

The Reuters/University of Michigan Surveys of Consumers sentiment index showed a reading of 87.1, down from 88.4 in March and the lowest in seven months. It was the third straight monthly fall in the index but the final April reading was not as low as forecast...

The implicit deflator, one of several price measures within the GDP report, jumped at a four percent rate in the first quarter, more than double the prior quarter's 1.7 percent rate. It was the biggest rise in this gauge since the start of 1991.

A price gauge favored by the Federal Reserve -- personal consumption expenditures excluding food and energy items -- increased at a 2.2 percent rate in the first quarter, slightly ahead of forecasts for a 2.1 percent advance.

Businesses got a reprieve on employment costs though.

A second report, from the Labor Department, demonstrated corporate efforts to keep employee benefits damped, with overall employment costs rising a smaller-than-expected 0.8 percent in the first quarter.

That occurred despite a 1.1 percent gain in wages and salaries, the strongest since a 1.3 percent rise in the first quarter of 2001, as benefits costs edged up a scanty 0.1 percent, the least since a matching 0.1 percent rise in the first quarter of 1999.

However, most economists remain sanguine about the outlook. For example, Nigel Gault at Global Insight thinks that "the first quarter will prove to be the trough for growth".