Gross Domestic Product Rose at 1.6% Rate in First Quarter

The U.S. economy expanded at an annual rate of 1.6% in the first quarter of 2003, the Commerce Department reported Friday, which was significantly weaker than analysts had predicted.

Analysts were expecting the economy to grow at an annual rate of 2.4% for the quarter, Bloomberg reported.

The gross domestic product, which is the total value of all the goods and services produced in the United States, grew at 1.4% pace in the fourth quarter of 2002.

Commerce said consumer spending grew at a 1.4% annual pace from January to March, the slowest since the first quarter of 1993. Spending rose at a 1.7% rate in the fourth quarter of 2002.

Spending on non-durable goods rose at a 4.2% rate, while purchases of durable goods, including automobiles, fell at a 1.1% clip.

Consumer spending accounts for two-thirds of all economic activity, and when consumers spend more, it will mean more business for trucking companies as stores restock shelves.

However, analysts attributed the slower spending to concerns about the war with Iraq, terrorism and high oil prices, the Associated Press reported. Many economists said that with the war winding down, the stage is set for faster growth in the second half of the year.

Business spending also declined in the first quarter, the report said.

Corporate fixed investment, which includes spending on commercial construction and equipment and software, declined at a 4.2% annual rate in the first quarter after rising at a 2.3% pace in the previous three months.

The GDP price deflator, a gauge of inflation, rose at a tame 2.5% pace in the first quarter, Bloomberg said.

GDP shrank for three straight quarters in 2001, as the economy fell into its first recession since 1990-91. The economy has grown since the fourth quarter of 2001, but the recovery has been extremely choppy, CNN reported.