Initial figures for economic growth from the Bureau of Economic Analysis suggest that the United States economy grew at an 0.6 percent annual rate in the first quarter of 2008. Since that is the exact same figure registered for the last quarter of 2007, there is some temptation in certain quarters to express mild relief. Meanwhile, the Federal Reserve, while acknowledging that the economy is still "weak" and announcing yet another quarter percentage point rate cut, signaled that it may pause its seven-month campaign of rate easing, a sign that it believes the worst may be over.
The econoblogosphere is amusing itself by dithering over the technical definition of a "recession" and slicing up the BEA's data every which way they can. But there is one number, seized upon by The Capital Spectator's James Picerno, that jumps out. Personal consumption expenditures rose by only 1.0 percent, down from 2.3 percent growth during the last quarter. PCE measures consumer spending and it represents a whopping 72 percent of total U.S. gross domestic product.
It's been a long time coming, but American consumers are finally tightening their belts.
Optimists are looking forward to the arrival of economic stimulus checks, even now being direct-deposited in bank accounts and sent out in the mail, hoping that the influx of funds will reverse consumer gloominess. That seems like a stretch. The Fed may have reason to believe, as it noted in its statement accompaning the rate cut decision, that energy and other commodity prices will "level out" in coming quarters, but that's hardly comforting when considering how high the cost of gasoline and other basic staples has already risen. With the most recent figures on home price sales showing a significant 12.7 percent year-on-year drop, it's no wonder consumer confidence is at a five-year low. No matter how badly our government wants us to go shopping, now just doesn't seem like a good time to splurge.