- The Washington Times - Wednesday, September 29, 2004


The economy grew at a faster pace this spring than previously thought, but was at its weakest level in more than a year, providing ammunition to both candidates in the final weeks of the presidential race.

The 3.3 percent annual growth rate of gross domestic product (GDP) in the April-June period was stronger than the 2.8 percent pace estimated last month, the Commerce Department said yesterday. The GDP is the country’s total output of goods and services.

Still, the improvement was significantly lower than the first quarter’s 4.5 percent annual rate.

The second-quarter boost to the nearly $11.7 trillion economy came from expanded business inventories and investments, an increase in imports and a drop in exports.

On Wall Street, the Dow Jones Industrial Average finished up 58.84, or 0.6 percent, at 10,136.24, adding to an 88-point gain on Tuesday. The Standard & Poor’s 500 index rose 4.74, or 0.4 percent, to 1,114.80.

The Nasdaq surged 24.07, or 1.3 percent, to 1,893.94, partly because of enthusiasm over the potential acquisition of travel site Orbitz Inc. Buying in the chip sector, oversold after weeks of downgrades and third-quarter warnings, also buoyed tech shares. The Philadelphia Semiconductor index was up 1.9 percent.

“The economy is doing better than many anticipated,” said Sung Won Sohn, economist at Wells Fargo & Co. “And the better news is that economic growth will accelerate.”

Also yesterday, the International Monetary Fund (IMF) said the U.S. economy should grow by a solid 4.3 percent this year. That prediction marked a slight downward revision from the IMF’s spring forecast that growth would be at an even faster 4.6 percent this year.

The government’s first estimate of third-quarter GDP will be released Oct. 29, four days before the election.

That could provide more good news for President Bush in a campaign that is focused heavily on the economy. Democratic opponent Sen. John Kerry has criticized Mr. Bush’s record on job creation, rising costs for energy and health care and record budget deficits.

Treasury Secretary John W. Snow said the GDP report was “good news for the U.S. economy and American families.” He said the “fundamentals of the economy are solid, and we are in a period of rising prosperity and strong growth.”

Mr. Kerry’s campaign pointed to the sluggish second quarter.

“Though George Bush keeps telling American families that things are getting better, the reality is a much different story,” Kerry spokeswoman Allison Dobson said.

Federal Reserve Chairman Alan Greenspan has called the early-summer slowdown a “soft patch” and predicted that the economy will rebound. The Fed raised interest rates last week for the third time since June. But some private economists worry that his forecast might be overly optimistic in light of a renewed surge in energy costs.

The price of crude oil in trading this week has topped the $50-per-barrel mark, a record in dollar terms. Analysts see surging oil prices as a major threat to the expansion because the more consumers spend on energy, the less they have to spend on other goods.

“Slower growth is most visible at shopping malls and in new-car showrooms,” said Peter Morici, an economist and international business professor at the University of Maryland.

Consumer spending, which accounts for two-thirds of total economic activity, came to a near standstill in the spring. Spending grew at an annual rate of just 1.6 percent, the slowest pace in three years. The government is expected to release new figures today.

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