The U.S. economy probably grew in the first quarter at the slowest pace in five years as consumer and business spending faltered and the housing slump deepened, economists said before a government report today.
A 0.5 percent annual pace of growth from January through March, the smallest gain since the last three months of 2002, is the median estimate of 80 economists surveyed by Bloomberg News.
“I’d probably call it a recession,” said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. “It’s a pretty bad environment that is unlikely to get better any time soon. The consumer is on very shaky footing.”
Spending by households, the biggest part of the economy, probably grew last quarter at the slowest pace in 13 years as job losses mounted, food and fuel prices surged and property values tumbled. Federal Reserve policy makers are forecast to cut the benchmark interest rate today to limit the downturn.
The Commerce Department’s report on gross domestic product, the volume of all goods and services produced, is due at 8:30 a.m. in Washington. The economy grew at a 0.6 percent pace in the last three months of 2007.
From the AP:
The Federal Reserve, which began the year aggressively fighting a severe credit crunch and economic weakness, may push the pause button after delivering perhaps one more quarter-point cut in interest rates.
Fed Chairman Ben Bernanke and his colleagues were to wrap up a two-day meeting Wednesday and financial markets widely expected that the discussions will end with an announcement that the Fed will cut a key interest rate by a quarter-point.
That would be the seventh reduction in the federal funds rate since the central bank began battling against the credit squeeze and the growing possibility of a recession last September.
The Fed delivered two three-quarter-point moves and one half-point cut over an eight-week period from mid-January to mid-March that represented the central bank’s most aggressive rate cuts in a quarter-century.
However, the central bank is expected to respond with a less aggressive quarter-point move at this meeting, in part because the financial turmoil seems to have eased and because there are growing concerns about inflation.
While there is some thought that the Fed might decide to forgo a rate cut, most analysts believe that the greater likelihood is a quarter-point move.