Friday, March 28, 2003

Slow growth fosters worries of recession

By Jeannine Aversa
The Associated Press


WASHINGTON - The economy that turned sluggish at the end of last year isn't doing much better now - and might well be doing worse - as war uncertainties and the stagnant job market make consumers and businesses more cautious. Some analysts worry about a slide back into recession.

Since the 2001 recession, the economy has tried, unsuccessfully so far, to get back to full throttle.

Optimistic analysts think that the economy in the January-March quarter has grown at a below-normal annual rate of around 1.5 percent to just over 2 percent. More pessimistic economists are suggesting growth of under 1 percent, and some think that the first quarter could show that the economy shrank, a step toward recession.

"I don't think anybody really wants to make significant financial commitments in view of the jobless recovery, the geopolitical situation and higher energy prices, which are eating into purchasing power," said Sung Won Sohn, chief economist at Wells Fargo.

The broadest measure of economic health - gross domestic product - slowed from a 4 percent annual growth rate in the third quarter of 2002 to 1.4 percent in the final quarter, the Commerce Department reported Thursday.

That final quarterly estimate was unchanged from a month ago. GDP measures the total value of goods and services produced within the United States.

While Sohn thinks the economy will grow at a 2 percent rate in the first quarter, Carl Tannenbaum, chief economist at LaSalle Bank is more bearish, forecasting 0.5 percent growth rate. "The chance of having a negative first quarter is very real," he said.

The government will release its initial estimate of first-quarter GDP April 25. In a second report Thursday, new claims for unemployment benefits last week fell to 402,000, a two-month low, the Labor Department said. Even with the drop, claims are at a level suggesting the job market remains sluggish.

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