Iacocca campaigned for Bush in 2000, now endorses Kerry in 2004

GDP growth slows , Inflation up

GDP growth slows
Broad measure of U.S. economic growth slashed to 3.9% from earlier 4.4% reading; inflation index up.
June 25, 2004: 11:16 AM EDT

NEW YORK (CNN/Money) - The nation's economic growth slowed to a 3.9 percent annual rate in the first quarter, a lower pace of growth than previously reported, the government said Friday.

The final reading of gross domestic product, which measures the value of all goods and services produced in the United States, had been expected to come in at a 4.4 percent annual growth rate, according to a survey of economists from Briefing.com. That would have been unchanged from the previous report on the period.

The final first-quarter growth rate is slower than the 4.1 percent gain posted for the fourth quarter. The slowing in the growth rate of the U.S. economy surprised many observers.

"We had expected a small braking, a minor tap on the pedal, from GDP growth but not a move down to a lower gear," said Robert Brusca, economist with FAO Economics.

This marked the second straight quarter that the final GDP reading is lower than the previous period, but some economists said the growth rate still shows strength in the U.S. economy.

"It's certainly lower than expectations so in that sense it was a disappointment, but the key thing is that this is still appreciably better as a growth rate than the long-term average, which is only about 3 percent," Patrick Fearon, economist with A.G. Edwards, told Reuters. "We've now had three straight quarters of above-average growth, and that's nothing to sneeze at."

The core price index, which measures prices paid by consumers on items other than food and energy, came in up 2 percent in the quarter, up from 1.7 percent in the earlier reading. The measure is closely watched by the Federal Reserve for signs of inflationary pressure.

Investors have been looking closely at all inflation measures to get a reading on how fast the Fed will raise interest rates. Fed policy makers are widely expected to raise rates by a quarter of a percentage point at their Wednesday meeting, which will be the first hike in interest rates by the central bank in four years.

Still some economists said Friday's report was not a significant cause for concern, even if it reinforces the belief that the Fed will be raising rates to combat inflation.

"The core (inflation measure), while it's up, still looks very contained," said Anthony Chan, chief economist for Banc One Investment Advisors. "This just keeps the Federal Reserve interest rate hike engine humming along after June 30."

The Commerce Department said the lower first-quarter growth rate was due to a sharp increase in its reading on the value of imports -- which subtract from GDP -- and a downward revision to the amount consumers spent on bank services.


http://money.cnn.com/2004/06/25/news/economy/gdp/index.htm?cnn=yes

(might as well use up the space, wonder if it will work though)