The economy turned in its weakest performance in 18 months during the first quarter of 1995, but a rebound for factory orders in May pointed to a modest recovery.
The Commerce Department said Friday that gross domestic product grew at a 2.7 percent annual rate in the first three months of 1995, barely more than half the pace of expansion in the previous quarter. The first quarter rate was unchanged from a month-old estimate.The department also reported that factory orders rose 1.4 percent in May after three straight declines, including a 2.2 percent drop in April.
Analysts believe the second quarter, which ends today, was far more sluggish than the first three months and the economy even may have shrunk. But most do not foresee a recession on the horizon and expect at least a modest rebound by the end of the year.
"Overall, we have sluggish growth," said economist Robert Dederick of Northern Trust Co. in Chicago. "We're getting extremely ambiguous data. The economy is not falling on its face, but it's been limping."
The stock market was trading higher, with the Dow Jones industrial average up nearly 14 points in early Friday trading. Bonds prices were marginally higher.
Recent conflicting signals pose a dilemma for the Federal Reserve, which meets for two days next week to consider cutting short-term interest rates to put some spark back in the economy.
The Commerce Department report said consumer spending in the first quarter was a little weaker than previously estimated. But the downward revision was offset by higher net exports and business investment in durable goods.
The Commerce Department said that GDP increased $36.3 billion at an annual rate in January through March, compared to a booming $66.8 billion or 5.1 percent rate in the final three months of 1994.
Inflation during the first quarter was slightly higher but still well within the moderate range. One measure of inflation tied to GDP rose 3 percent in the first three months, compared to 2.6 percent the fourth quarter last year.