The US economy barely inched forward in the first three months of the year, and many analysts believe it is doing even worse now.
The Commerce Department reported Friday that gross domestic product -- the country's total output of goods and services -- grew at an annual rate of 1.2 percent from January to March, slightly slower than the government previously thought.
Many analysts believe the economy grew at a barely discernible 0.5 percent rate in the just ending April-June quarter, though some predict it didn't grow at all or actually shrank. The government's estimate of second-quarter GDP won't be released until late July.
"The second quarter will probably mark the bottoming out of the economic slowdown," said Lynn Reaser, chief economist at Banc of America Capital Management. That would, in part, come from consumers tightening their belts in response to higher energy prices and a rash of layoffs.
But it's also likely to reflect continued weak investment by businesses in new plants and equipment, a factor contributing to the first quarter's anemic performance, economists said.
The second quarter will probably turn out to be the weakest quarter of the year and mark the lowest point for the economy since it entered a period of sub-par growth in the second half of last year, economists said.
``Even if we dip into negative territory in the second quarter, I still expect the economy to pick up in the third quarter and gain more strength in the fourth,'' said Bill Cheney, chief economist at John Hancock.
To stave off recession, the Federal Reserve has cut interest rates six times this year. The latest reduction, on Wednesday, was the first to be by a more conservative quarter-point; the other five were by bolder half-points each.
Economists are hopeful the Fed's aggressive credit-easing campaign, along with Congress' tax-cut refunds of up to US$600, will help bolster economic growth later this year and permit the country to dodge a recession.
The government's final reading on first-quarter GDP showed the economy growing a tad more slowly than the 1.3 percent rate estimated a month ago. The government originally reported that the economy grew at a 2 percent rate in the first quarter.
Friday's report also showed that US companies' profits in the first quarter posted their biggest decline in three years, reflecting the impact of higher energy and labor costs and slower sales. After-tax profits fell by 6.2 percent, following a 4.3 percent drop in the fourth quarter.
In a speech Thursday, Fed Chairman Alan Greenspan said the country should be able to escape its current energy problems without long-term harm. Recent declines in the price of gasoline and natural gas and increased supplies of those fuels give hope that the worst may be over, he said.
The 1.2 percent first-quarter growth rate in GDP came after an even slower 1 percent showing in the fourth quarter of 2000.
As demand has flagged, companies have been working hard to whittle down excess inventories of unsold goods. That process subtracted 2.97 percentage points from first-quarter growth, the biggest drag on the GDP. While paring inventory reduces economic growth, economists say the excess must be cleared before companies can begin ramping up production.
Another drag on first-quarter growth: Business investment in computers and other equipment decreased at an annual rate of 2.3 percent, the second consecutive quarterly drop for a sector that has been one of the pillars supporting the country's record 10-year expansion.
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