Home > Pace of US Economy’s Growth Slowest in Three Years
By Alan Fein
(AXcess News) New York - The US Commerce Department economic report, released Friday, shows that the US economy grew at the slowest pace in three years, rising only 1.1 percent in the last quarter of 2005.
The economic Report states that for the year, the US economy grew 3.5 percent in 2005 overall.
The nation’s growth in gross domestic product (GDP) rose a brisk 4.1 percent in the third quarter, in sharp contrast to the 1.1 percent growth in GDP in the fourth-quarter that the US Commerce Department reported Friday.
Economic-watchers were predicting the US GDP to have grown 2.8 percent in the fourth-quarter prior to the release of the US Commerce Department’s report.
The last time the US economy showed such slow growth was in the fourth-quarter of 2002, when the US economy expanded at just a 0.2 percent rate.
While Wall Street peered closely at retail spending during the holiday shopping period, even though there was a rise in over-all consumer spending in the fourth-quarter, especially e-commerce growth, consumers stayed away from borrowing and big ticket items.
Now, financial pundits, who were way off in their GDP estimates for US growth in the fourth-quarter, are saying that the slow down in the US economy in the fourth-quarter is temporary and not a sign of economic weakness ahead. But then, I guess they weren’t following the US auto industry after Ford Motor Co. (NYSE: F) announced the plant closings and plans of laying off up to 30,000 auto workers.
High energy costs and a rise in interest rates during the fourth-quarter worried consumers somewhat and those same economic growth inhibitors were felt in industry as well.
Recent spikes in oil prices and Bernanke’s assumption as the new Fed chief at the end of this month will most likely add to Wall Street’s own insecurity on US economic growth. Oil remains above $65 a barrel and the Fed is most likely to raise short-term interest rates when its monetary committee meets on January 31st. That most likely will hold US economic growth back in the first quarter of 2006.
The US stock markets Friday were trading up at 11:30am EST despite the slow growth report from the US Department of Commerce this morning. The DJIA was up 82.69 basis points, or 0.76%, at 10.892.16. The S&P 500 index followed the Dow higher at 1,283.25, up 9.42 basis points, or 0.74%. The NASDAQ national market index was up 21.98 basis points, or 0.96%, at 2,304.98.
The 10-year US Treasury bond was unchanged at a yield of 4.521%.