Press Release

STATEMENT: All Signs Point in the Wrong Direction

By Christian E. Weller

Washington, D.C. – U.S. economic growth estimates released today for the first quarter of 2008 show that all parts of our economy experienced slower growth compared to the previous quarter, even exports, which is especially troubling given the overall weak performance of all other sectors.

The Department of Commerce’s Bureau of Economic Analysis’s advance estimates for economic growth in the first quarter reported an anemic annualized growth rate of 0.6 percent—the very same low growth rate in the fourth quarter of 2007. Consumption, investment, government spending, and trade all put in performances that were weaker than they had been in years.

Let’s start with consumer spending, which is the largest part of the U.S. economy. According to today’s figures, consumers increased their spending by 1.0 percent in the first quarter of this year. This is the slowest growth rate of consumer spending since the second quarter of 2001, when the economy was in the midst of the last recession.

In particular, spending on consumer durables—such as cars and refrigerators—took a dive, dropping 6.1 percent. This was the largest drop since the fourth quarter of 2005. Before then, the last time consumer spending on durables dropped this much was in the second quarter of 2000—before the signs of the last recession became apparent.

On the investment side, we see weaknesses among consumers emerging again. In particular, spending on new homes and renovations dropped by another 26.7 percent. This decline surpassed all of the quarterly decreases over the previous eight quarters, making this the ninth quarter in a row of lower spending in this area. To put this in perspective, this has been the longest continuous slide in residential real estate since the late 1950s.