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Commerce Report Raises Eyebrows
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"The consumer has not been spooked by either the meltdown in housing or the recent rise in gasoline prices," said Nariman Behravesh, chief economist at Global Insight. He said consumer spending would probably slow, but not enough to tip the economy into recession.
Housing, however, remains a drag on the economy. Spending on residential construction fell at a 17 percent annualized rate in the January through March period, the sixth consecutive quarterly decline.
Data show the housing slump is continuing, exacerbated by rising foreclosures that have added to the supply of unsold homes and caused lenders to tighten credit for some buyers. Sales of previously owned homes, which account for about 85 percent of the market, plunged in March by the largest amount in nearly two decades.
The Commerce Department also estimated that U.S. exports, which rose strongly and boosted economic growth last year, fell at a 1.2 percent annual rate in the first three months of this year.
Another soft spot was business spending on buildings, equipment and software, which rose at a 2 percent annual rate in the first quarter -- a modest gain, but an improvement after a worrisome 3.1 percent decline in the fourth quarter of 2006.
Meanwhile, consumer prices jumped at a rapid 3.4 percent annual rate in the first quarter, after falling in the last quarter of 2006, following the path of energy costs. After excluding volatile food and energy prices, consumer prices rose by 2.2 percent, compared with a 1.8 percent rise in the previous three-month period.
Crude oil prices surged yesterday to $66.46 a barrel on the New York Mercantile Exchange, the highest level in almost eight months.
The Commerce Department's report provides a first estimate of GDP growth. The figures will be revised in coming months as more data become available.
