|Starts, Stops and Stumbles|
|Topic||Productivity and Growth|
|Key Words||Recession, Unemployment, GDP|
According to the Commerce Department, U.S. economic growth slowed considerably
in the final three months of 2002. Gross domestic product rose at a 0.7
percent annual rate for the fourth quarter after adjusting for inflation,
considerably slower than the 4 percent growth rate reported for the third
quarter. Over the year 2002, economic growth was a moderate 2.8 percent.
Consumers, who had sustained the recovery throughout 2002, turned cautious,
and consumer spending rose at a 1 percent annual rate, the smallest increase
in a decade. On a positive note, business investment recorded its first
positive gain in two years, but the gain was not significant enough to
compensate for the cutback in consumer spending.
Exports declined in the fourth quarter while imports increased, resulting
in an increase in the trade gap of $18.9 billion. Government spending
increased 10.1 percent in the quarter, largely as a consequence of increases
in military spending resulting from a call up of reserves and mobilization
for a possible war. Absent the increase in government spending, GDP would
have declined by 0.2 percent.
Many economists believe that the primary problem with the economy is
its failure to meet consumer expectations. The late 1990s were characterized
by significant economic growth and substantial run-ups in the stock market.
Lots of people made lots of money. The recession of 2000 coupled with
the terrorist attacks of September 11 changed all that. The economy is
fundamentally sound, and as moderate growth continues, economists expect
expectations to align with performance.
(Updated April 3, 2003)
|Source||Daniel Altman, "Slim Growth For Economy In 4th Quarter," The New York Times, January 31, 2003.|
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