Eco­nomic move­ments

The Washington Times Weekly - - Editorials -

U.S. eco­nomic growth sharply de­cel­er­ated dur­ing the third quar­ter, fall­ing to an an­nual rate of 1.6 per­cent af­ter ex­pand­ing at a 2.6 per­cent rate dur­ing the sec­ond quar­ter. Third-quar­ter growth pro­ceeded at the slow­est pace since the first quar­ter of 2003. Dur­ing the first quar­ter of 2006, the econ­omy grew at a blis­ter­ing 5.6 per­cent an­nual rate, which largely re­flected the re­bound from the Ka­t­rina-in­duced slow­down dur­ing last year’s fourth quar­ter, when growth had fallen to 1.8 per­cent. Dur­ing the last four quar­ters, the econ­omy has ex­panded by 2.9 per­cent, the slow­est four-quar­ter growth rate in more than three years. Since Pres­i­dent Bush en­tered of­fice, when he in­her­ited a mild re­ces­sion, the U.S. econ­omy has ex­panded at an av­er­age an­nual rate slightly be­low 2.6 per­cent.

For the fourth con­sec­u­tive quar­ter, res­i­den­tial con­struc­tion de­clined, ex­ert­ing down­ward pres­sure on the econ­omy’s over­all growth rate. Af­ter fall­ing at an an­nual rate of 11.1 per­cent dur­ing the sec­ond quar­ter, res­i­den­tial con­struc­tion plunged 17.4 per­cent last quar­ter. The hous­ing mar­ket ap­pears to have en­tered its long-awaited cor­rec­tion. Two weeks ago, the fed­eral gov­ern­ment re­ported that sales of new one-fam­ily houses in Septem­ber were 14.2 per­cent be­low the Septem­ber 2005 level, while the me­dian sales price had dropped 10 per­cent ($23,300) from its year-ear­lier level. Mean­while, the Na­tional As­so­ci­a­tion of Real­tors re­ported two weeks ago that ex­ist­ing-home sales in Septem­ber were also down 14.2 per­cent from Septem­ber 2005. Bloomberg re­ported that it was “the big­gest year-over-year de­cline since record-keep­ing be­gan in 1969.” The evolv­ing hous­ing cor­rec­tion may be in­creas­ing pub­lic con­cern on the health of the econ­omy.

Mean­while, in­vest­ment re­bounded smartly, ris­ing at a 8.6 per­cent pace, nearly dou­ble the rate dur­ing the sec­ond quar­ter. Per­sonal con­sump­tion ad­vanced briskly at a 3.1 per­cent an­nual rate. There was also good news on the in­fla­tion front. The price in­dex for core per­sonal con­sump­tion ex­pen­di­tures (PCE) in­creased at a 2.3 per­cent an­nual rate dur­ing the third quar­ter. That was down from 2.7 per­cent dur­ing the AprilJune pe­riod. In a sep­a­rate re­port on per­sonal in­come and out­lays re­leased late last month, the monthly core PCE mea­sured on a year-over-year ba­sis, de­clined for the first time since Jan­uary. The stock mar­kets’ con­tin­ued ad­vance is an­other piece of good news on the eco­nomic front. Whether the econ­omy has achieved the much-de­sired “soft land­ing” or is on the verge of a hard fall re­mains to be seen.

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