The growth rate in the U.S. economy slowed dramatically to 1.8 percent in the first three months of the year as consumers turned more cautious and defense spending dropped sharply, the government said Thursday.
The increase in the gross domestic product, the sum of all goods and services produced in the United States, was less than half the robust 4.7 percent annual rate of the fourth quarter, the Commerce Department said.The White House immediately seized on the figures to renew its pitch for a $16.2 billion job-creating stimulus package, blocked last week by Senate Republicans.
"Obviously, the president is very concerned about this," said White House spokeswoman Dee Dee Myers. "The president believes we have to get out of this recession."
However, economist Norman Robertson, an adjunct professor at Carnegie-Mellon University in Pittsburgh, said, "I don't think this number in any way implies we are on the threshold of another recession."
"It illustrates the unevenness and lack of consistency of this economic expansion," he said.
A spending spree by holiday shoppers had helped push growth to a five-year high during the final three months of 1992, but this year consumers have focused more on paying credit card bills than on making new purchases.
In advance, economists were looking for a somewhat better first quarter rate of between 2 percent and 2.5 percent. Much of the decline was accounted for by an unexpectedly sharp drop in defense spending. Excluding that, GDP advanced at a 3.5 percent annual rate, department officials said.
Commerce Secretary Ronald H. Brown said the report "confirms yet again that our economy is growing, but at an unacceptably low rate." The economy would benefit from "a modest and focused jobs package," he said.
Stock prices dipped Thursday morning after the report's release, while bond prices edged higher. Bonds often react favorably to negative economic news because it makes it less likely the Federal Reserve will push interest rates higher.
In another economic report Thursday, the Commerce Department said sales of new homes unexpectedly rose 4.8 percent to a seasonally adjusted annual rate of 637,000 in March, despite a severe East Coast storm. Declines in the Northeast and South were offset by jumps in both the Midwest and West.
Also, the Labor Department said first-time claims for jobless benefits dropped by 7,000 last week to 349,000. Analysts said the small drop suggests a stable labor market.
The first quarter marked the eighth in a row that the economy grew, following a three-quarter recession in 1990-91. However, the growth has been only about half as strong as in previous expansions.
The Commerce Department cautioned that Thursday's report was a preliminary estimate subject to change. Based on the history of revisions to past reports, it said the first quarter growth rate probably will fall somewhere between 1.3 percent and 2.7 percent.
In the first quarter, consumer spending grew at a 1.2 percent rate after shooting up 5.1 percent in the fourth. Housing construction grew just 0.2 percent after jumping 25.1 percent.
Overall federal, state and local government spending declined at a 6.4 percent rate. That included a 25.5 percent drop in military spending, the biggest since the government began tracking that category in 1972.
Defense spending, adjusted for inflation, now is at the lowest level since 1984.
Commercial construction fell 2.2 percent in the first quarter, the fourth consecutive decline. However, businesses' investment in new equipment rose at a healthy 8.6 percent rate on top of a 14.5 percent gain in the fourth quarter.
Both imports and exports fell in the first quarter, but exports fell faster, detracting from growth. It was the fourth time in the past five quarters that international trade has acted as a drag on the economy.