is it true!!!!

@aish0123 (142)
India
December 22, 2006 5:22am CST
why does it happend? The economy grew more sluggishly this summer than initially thought, as a sharp contraction in the housing market held overall growth down to barely a third of the pace recorded at the beginning of the year. The Commerce Department reported yesterday that the gross domestic product, the nation’s output of goods and services, grew at a 2 percent annual rate in the third quarter, from July through September. The department’s earlier estimate for the period, issued last month, was 2.2 percent. After roaring along at a 5.6 percent annual rate in the first quarter, growth in the gross domestic product has slowed considerably this year. Growth fell to 2.6 percent in the second quarter, and many economists expect the fourth quarter to be no better. The economy showed further signs of lethargy yesterday as the Conference Board reported that its outlook for growth over the next several months — a gauge that considers everything from the labor market to stock prices — rose just 0.1 percent this month. In addition, the Federal Reserve Bank of Philadelphia reported yesterday that its index of business activity in the mid-Atlantic dropped unexpectedly in November. The news sent stock prices into retreat yesterday, with the Dow off 42 points and the Standard & Poor’s 500-stock index and the Nasdaq composite both slipping moderately. Bond prices rose by the most in three weeks, a sign that investors expect economic growth to weaken further. The biggest reason for the slowdown in the third quarter was contraction in the housing market. A drop in residential construction subtracted 1.2 percentage points from the overall growth rate. That was slightly more than the government first reported, and reflected the sharpest decline in building activity in 15 years. Slower consumer spending on services and a rise in imports also contributed to the downward revision to third-quarter G.D.P. “Clearly, the housing downturn is even worse than we’ve been thinking,” said Nariman Behravesh, chief economist with Global Insight. “But the good news is, so far, it doesn’t seem to have spilled over into other parts of the economy.” Spending by consumers, businesses and government remained strong in the third quarter, and corporate profits almost tripled from the second quarter. A belief that the effects of the housing slowdown will not be widespread is one of the reasons economists expect economic growth to remain in the black next year. But whether economic growth will slow so much that the Federal Reserve will consider lowering interest rates is far from clear. Many investors and economists are expecting the central bank to start reducing rates sometime in the first half of 2007, but the Fed has so far sounded a hesitant and cautionary note on growth, while keeping its attention mainly on lingering threats of inflation. “There’s a good chance the Fed might take out some insurance, but we see the probability of a soft landing as quite good,” said Peter E. Kretzmer, an economist with Bank of America, who said he believed the Fed would lower interest rates only once next year. The G.D.P. report showed that price increases, too, may be starting to cool. A broad measure of inflation that is closely watched by the Fed, known as the core personal consumption expenditures index, rose 2.2 percent in the third quarter, compared with a 2.7 percent rise in the second quarter. The Fed considers any reading over 2 percent to be too high for comfort. Separately, the number of people filing unemployment claims rose 9,000, to 315,000 last week. The four-week jobless claims moving average fell to 325,750, which compares with 327,750 last week.
No responses