U.S. GDP Surprises With 2% Rise

The U.S. economy was not as weak in the first quarter as many had feared, but grew at an annual rate of 2.0%, the Commerce Department said Friday.

Markets were generally braced for a 1.1% gain in gross domestic product for the start of 2001, after the dismal 1% growth rate for the final period of 2000.

Even though the number was roughly double what was expected, it still marks a sharp slowdown from the middle of last year. It also comes amid a large number of company announcements of job and production cuts, and poor quarterly results.

News stories breaking down the report on gross domestic product said consumer spending remained surprisingly strong, and a shrinking trade balance helped beef up the GDP growth rate.

However, many economists worry about both those factors.

In April, consumer confidence measures – which shape future spending patterns -- have been weakening again.

And while the drop in imports in recent months technically adds to GDP, it also suggests weaker U.S. consumer demand for products from abroad.

In other words, the second-quarter economic outlook remains shakier than those first-quarter numbers would suggest, as consumer spending may not hold up. Already, capital spending by companies has been hurt and many companies are making fur-ther cuts, so private consumption must remain strong to keep the economy afloat.

As an example of that uncertainty surrounding economic conditions, the president of FedEx told Reuters Friday that the company is seeing demand slacken in the United States.

On Thursday, the Association of American Railroads said weekly intermodal freight shipments – especially trailer movements, which reflect domestic manufacturing activity -- continue to weaken, and the Labor Department said weekly claims for jobless insurance benefits continue to rise.

But reports from both government and private sources this week showed the housing market was bubbling with activity during March.

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