- The Washington Times - Friday, August 27, 2004


The economy was even more sluggish than initially believed during the second quarter. But Federal Reserve policy-makers believe the pace will pick up in coming months, something President Bush is counting on as the election approaches.

The Commerce Department reported yesterday that gross domestic product grew at a 2.8 percent annual rate in the April-to-June quarter, down from an earlier estimate of a 3 percent pace. The new GDP reading — the smallest gain in just over a year — indicated the economy slowed considerably compared with the brisk 4.5 percent growth rate in the first quarter of 2004.

“We’re no longer sprinting, but we are not running out of wind either,” said Richard Yamarone, economist at Argus Research Corp.

Gross domestic product measures the value of all goods and services produced within the United States and is considered the broadest barometer of the economy’s fitness.

The new figure was slightly better than the 2.7 percent rate economists were expecting, but it still provided fresh evidence of the “soft patch” that Federal Reserve Chairman Alan Greenspan said the economy had hit in June.

Mr. Greenspan and his Fed colleagues, in boosting short-term interest rates Aug. 10, however, had said the economy appeared “poised to resume a stronger pace of expansion” in the months ahead.

Private economists believe the economy is gaining momentum in the current July-to-September quarter, with growth rate estimates ranging from 3 percent to 4 percent. The government’s first estimate of third-quarter GDP will be released Oct. 29 — just days before the Nov. 2 elections.

On Wall Street, the Dow Jones industrials gained 21.60 points to close at 10,195.01.

Broader stock indicators were modestly higher. The Standard & Poor’s 500 Index was up 2.68, or 0.2 percent, at 1,107.77, and the Nasdaq Composite Index gained 9.16, or 0.5 percent, to 1,862.08.

For the week, the Dow gained 0.8 percent, the S&P; was up 0.9 percent and the Nasdaq rose 1.3 percent. It was the second straight week of gains for the Nasdaq and the third straight week higher for the Dow and S&P.;

Although economists believe the Fed will raise interest rates for a third time this year on Sept. 21, they said much hinges on the August employment report, to be issued next week.

The latest snapshot of economic activity comes as Mr. Bush gears up for the Republican convention, and the presidential election is just over two months away.

Mr. Bush and his Democratic opponent, John Kerry, joust frequently over the economy’s health and the availability of jobs.

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