The US economy slowed dramatically in the spring to an annual growth rate of 3 percent, as consumers, worried about higher gasoline prices, cut back their spending to the weakest pace in three years, the US Commerce Department reported on Friday.
The April to June advance in the GDP was below the 3.8 percent increase many economists had expected and was significantly down from a revised 4.5 percent growth rate in the first three months of the year.
The administration, counting on a rebounding economy to bolster US President George W. Bush's re-election prospects, insisted the second-quarter slowdown was only temporary and forecast that growth would rebound in the second half of the year.
Secretary of the Treasury John Snow noted the upward revision of the first-quarter GDP figures with the lower-than-expected second quarter figure. If the two figures were averaged together, he said, it gave evidence of an economy growing at a solid 3.75 percent rate.
"We're on a positive track, and the fundamentals are solid for the future," Snow said in a statement.
Democratic presidential candidate Senator John Kerry, however, drew a contrast with the economy during the Clinton administration.
"Guess what? In the last four years, the income of average Americans has dropped by US$1,600" while the cost of health care, education and gasoline have gone up, he told a crowd at a rally in Harrisburg, Pennsylvania, on Friday.
Private economists were troubled that the second-quarter slowdown could develop into something worse, especially if job growth fails to rebound after a disappointing rise of just 112,000 payroll jobs in June.
Last month's jobs data will be released Aug. 6.
"All in all, the GDP was a disappointing report," said Mark Zandi, chief economist at Economy.com. "All the surprises were on the downside."
The weaker-than-expected GDP number gave Wall Street more to worry about in terms of how strong the economy will perform in the second half of this year.
The biggest drag on second quarter GDP came from consumer spending, which rose by just 1 percent in the second quarter, the weakest showing since a similar 1 percent rise in the second quarter of 2001, when the economy was in recession. Consumer spending, a main driver of the recovery, accounts for two-thirds of American economic activity.
The weakness came from a 2.5 percent decline in spending on big-ticket items such as automobiles.
Analysts noted, however, that auto sales, after a bad June, have improved last month as dealers resumed offering incentives to boost sales. Economists said they still expect GDP growth to come in at 4 percent or better rate in the second half of the year, which would be strong enough to generate new jobs and maintain the decline in unemployment.
Bush talks often of the economy's creation of 1.5 million new jobs in the past 10 months. Kerry argues that this still leaves the country with 1.1 million fewer jobs than when Bush took office in January 2001.
Kerry contends Bush is pursuing a failed economic policy that has produced the worst jobs record of any president since Herbert Hoover and is subjecting Americans to a "middle-class squeeze" of falling wages and rising costs for health care and education.
The GDP report was the latest indication that the economy, which had been racing ahead in recent months, hit what Federal Reserve Chairman Alan Greenspan described as a "soft patch" in June.
Sung Won Sohn, chief economist at Wells Fargo in Minneapolis, said the problem was that many of the factors that had provided stimuli, such as Bush's tax cuts and low interest rates supplied by the Fed, were beginning to wane.
Sohn said the GDP report provided evidence that other sectors were beginning to take up the slack, with business investment rising at a solid 8.9 percent rate, propelled by a 10 percent increase in sales of equipment and software.
Inflation remained tame in the second quarter, as reflected by a GDP inflation gauge favored by Greenspan: excluding energy and food, prices rose at an annual rate of just 1.8 percent, down slightly from a 2.1 percent increase in the first quarter.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Chizuko Kimura has become the first female sushi chef in the world to win a Michelin star, fulfilling a promise she made to her dying husband to continue his legacy. The 54-year-old Japanese chef regained the Michelin star her late husband, Shunei Kimura, won three years ago for their Sushi Shunei restaurant in Paris. For Shunei Kimura, the star was a dream come true. However, the joy was short-lived. He died from cancer just three months later in June 2022. He was 65. The following year, the restaurant in the heart of Montmartre lost its star rating. Chizuko Kimura insisted that the new star is still down
While China’s leaders use their economic and political might to fight US President Donald Trump’s trade war “to the end,” its army of social media soldiers are embarking on a more humorous campaign online. Trump’s tariff blitz has seen Washington and Beijing impose eye-watering duties on imports from the other, fanning a standoff between the economic superpowers that has sparked global recession fears and sent markets into a tailspin. Trump says his policy is a response to years of being “ripped off” by other countries and aims to bring manufacturing to the US, forcing companies to employ US workers. However, China’s online warriors