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Economy Rebounds Smartly in 1st Quarter

Old 04-28-06, 08:29 AM
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Economy Rebounds Smartly in 1st Quarter

http://news.yahoo.com/s/ap/economy;_...kxBHNlYwN0bQ--

WASHINGTON - Casting off an end-of-year lethargy, the U.S. economy bounded ahead in the opening quarter of this year at a 4.8 percent pace, the strongest growth spurt in 2 1/2 years.

The latest report on the economy, released by the
Commerce Department on Friday, showed that consumers, businesses and government all did their part in terms of robust spending and investment to spur a healthy pace of growth in the January-to-March quarter.

The 4.8 percent increase in the gross domestic product marked a vast improvement from the feeble 1.7 percent annual rate registered in the final quarter of 2005, when fallout from the Gulf Coast hurricanes, including high energy prices, prompted people and companies to tighten their belts.

The
GDP measures the value of all goods and services produced within the United States and is considered the best barometer of the economy's fitness.

"The economy is off to a strong start in 2006 and has fully rebounded from the fourth quarter's setback," said Stuart Hoffman, chief economist at PNC Financial Services Group.

The first quarter's performance — the best showing since the third quarter of 2003 — was close to economists' expectations. Before the report was released, private analysts were forecasting the economy to clock in at a 4.9 percent growth rate.

A recent spate of good economic reports, however, hasn't helped
President Bush's standing with the public. He is shouldering his lowest-ever job approval rating, at 36 percent, according to an AP-Ipsos poll.

Even with the economy zipping ahead in the first quarter, inflation actually moderated.

An inflation gauge closely watched by the
Federal Reserve showed that core prices — excluding food and energy — rose by 2 percent, down from 2.4 percent in the fourth quarter.

The inflation reading, however, was taken before oil prices zoomed to a record high of more than $75 a barrel last week. Although prices have retreated since then, they still remain high.

A separate report from the Labor Department suggested that the strengthening job market isn't fanning inflation. Employers' cost to hire and retain workers — wages and benefits — rose by 0.6 percent in the first quarter, the slowest pace in seven years. That mostly reflected less generous benefit packages.

To keep inflation at bay, the Fed is expected to boost interest rates again at its May 10 meeting, which would mark the 16th increase since June 2004. But after that, the central bank could take a break — perhaps temporarily — in its 2-year-old rate raising campaign, Fed Chairman Ben Bernanke suggested Thursday.

Bernanke and other Fed policymakers indicated that they want to proceed with caution because they don't want to hurt economic activity by pushing rates up too high.

In the first quarter, consumers — critical players in the shape of the overall economy — got their spending back in a more-normal groove. They boosted spending at a brisk rate of 5.5 percent, compared with paltry 0.9 percent pace in the fourth quarter. The first quarter's increase, the biggest since the third quarter of 2003, was led by spending on big-ticket goods such as cars.

Another force helping the economy in the first quarter was business investment. Business spending on equipment and software grew at a whopping rate of 16.4 percent, the largest gain since the first quarter of 2000. Businesses also ratcheted up investment on buildings and plants. Such capital investment is another key to the economy's continued good performance.

With businesses feeling better about the economy, hiring has picked up. In March, the unemployment rate dropped to 4.7 percent, matching January's — the lowest in 4 1/2 years.

Government spending also supported economic growth in the first quarter. This spending went up at a 3.9 percent pace, a turnaround from a 0.8 percent dip in the fourth quarter. Spending was strong at the federal level for both defense and non-defense. At the state and local level, government spending was flat.

Elsewhere in the GDP report, Americans' personal savings — savings as a percentage of after-tax income — dipped to negative 0.5 percent in the first quarter as consumer spending outpaced income growth. In the prior quarter, the savings rate stood at negative 0.2 percent.

Looking ahead, Bernanke said he expects the economy's growth to moderate in coming quarters but still be sufficiently strong to generate decent job growth. Risks to the mostly positive outlook, he said, could come from any prolonged runup in energy prices and sharp drop in housing activity. For now, neither scenario is envisioned.

One of the talking points in the 04 election (I think it was that one) was the "two Americas" concept. When it comes to the economy that really does seem to be the case since if you listen to people it sounds like doom and gloom but all the numbers/indicators seem to be doing great. Are we using the wrong metrics, do we need new ones? Is it the mind set of people still hasn't recovered from the recent downturn (was it ever actually officially a recession?)? Is it just the gas prices that have everyone down? Are we seeing some sort of repeat of Enron where people are just making the numbers up?
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Old 04-28-06, 08:37 AM
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I think the economy is okay right now, but the middle class are getting squeezed by stagnating wages and rising health care and energy costs. I'm not too optimistic about what this country is going to look like in 20 years.
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Old 04-28-06, 09:17 AM
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One thing that has been helping the wages has been cheap goods from China. I don't know how much cheaper goods can get at this point, so I think that effect has hit a plateau. Overall I think we're doing ok and I think we'll be ok going forward, but it's not "amazing" as some folks like to parrot around here.
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Old 04-28-06, 09:29 AM
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Other - I think it's doing fine now, but I am neither optimistic nor pessimistic about the future.
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Old 04-28-06, 09:46 AM
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I'm feeling pretty decent about the economy right now. Hopefully I'll be able to put aside some more money to invest this year.

I agree though that wages are a concern compared to rising costs, but I think they'll even out fairly soon.
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Old 04-28-06, 10:14 AM
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um... I guess all our local pessimists are sleeping in
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Old 04-28-06, 10:20 AM
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smartly?
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Old 04-28-06, 10:29 AM
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McJobs?
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Old 04-28-06, 10:45 AM
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Originally Posted by Nazgul
McJobs?
i think you were in the mortgage biz, are you getting a lot of calls about people trying to refi out of ARM's?
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Old 04-28-06, 10:46 AM
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Originally Posted by al_bundy
i think you were in the mortgage biz, are you getting a lot of calls about people trying to refi out of ARM's?
I worked in a loan office 5 years ago , but I'm in IT now. I'm in that boat with the ARM. It's due next year, but we're going to re-fi shortly.
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Old 04-28-06, 11:51 AM
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I have this deep desire to blame someone and something for the red-hot economy, record home ownership, and the full employment that we're seeing right now.
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Old 04-28-06, 12:04 PM
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Originally Posted by bhk
I have this deep desire to blame someone and something for the red-hot economy, record home ownership, and the full employment that we're seeing right now.
<img width = 300 src = "http://www.jackboulware.com/images/greenspan0225.l.jpg"></img>
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Old 04-28-06, 12:08 PM
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That's right! Greenspan agreed with cutting taxes.

Of course he also said we should cut the deficit.
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Old 04-28-06, 12:09 PM
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He was around when a presidential candidate decreed that "this is the worst economy since the depression" and the drive by media let him get away with it. He was also around when the stock market and economy collapsed in 2000.
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Old 04-28-06, 12:10 PM
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Originally Posted by bhk
I have this deep desire to blame someone and something for the red-hot economy, record home ownership, and the full employment that we're seeing right now.
Don't worry bhk, you're blameless.
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Old 04-28-06, 12:10 PM
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Originally Posted by bhk
He was around when a presidential candidate decreed that "this is the worst economy since the depression" and the drive by media let him get away with it. He was also around when the stock market and economy collapsed in 2000.
He was around when airplanes first flew.

He's been around forever, and he did a pretty good job in my opinion.
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Old 04-28-06, 12:14 PM
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He's been around forever, and he did a pretty good job in my opinion.
Absolutely.
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Old 04-28-06, 01:43 PM
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Greenspan agreed to cut taxes after he was told to do so by the administration.
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Old 04-28-06, 01:46 PM
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Just thought I would mention in a few weeks another report will negate this report.
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Old 04-28-06, 01:47 PM
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Originally Posted by classicman2
Greenspan agreed to cut taxes after he was told to do so by the administration.
I wasn't aware that the Fed chair had any control over tax policy.
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Old 04-28-06, 01:54 PM
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Originally Posted by wendersfan
I wasn't aware that the Fed chair had any control over tax policy.
You know what I meant.

He agreed to come out in support of the tax cuts - when he first opposed them.
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Old 04-28-06, 01:55 PM
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I'm not optimistic about the future.
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Old 04-28-06, 02:15 PM
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Originally Posted by classicman2
I'm not optimistic about the future.
SHOCKING!!!

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Old 04-28-06, 02:24 PM
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Originally Posted by kvrdave
SHOCKING!!!

How you can be optimistic about the future with a no-win war situation in Iraq; with the prospect of an energy crisis that will make the one in the '70s look like good times; the rich are getting richer and the poorer are getting poorer, and there is a decline in the middle class; wages for 81% of Americans have been either flat or actually decreased in real dollars over the past 10 years; the prospect of a volatile country like Iran obaining nuclear weapons; the electoral landscape that favors Republicans; etc.?
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Old 04-28-06, 02:34 PM
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Originally Posted by classicman2
the electoral landscape that favors Republicans; etc.?
Why are you worried about that? Haven't you been saying that the Dems will get more power ?
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