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US GDP figures better than expected

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Date: Wednesday 30 Apr 2008

LONDON (ShareCast) - US Gross Domestic Product grew just 0.15% in the first quarter of 2008, confirming suspicions that the US economy is beginning to seize up.

On an annualised basis, the growth rate was unchanged from the previous quarter at 0.6% and better than feared by economists, who had predicted annualised growth of just 0.2%.

Growth was hampered by weak consumer spending, which rose at an annualised rate of 1%, down from 2.3% in the fourth quarter of 2007.

However, the figures were boosted by a build-up in stocks by companies; stocks of unsold goods rose at an annualised $1.8bn after declining by an annualised $18.3bn in the preceding quarter.

The GDP figures are likely to be taken into account by the Federal Reserves Open Market Committee (FOMC) in its deliberations today over whether to fulfil market expectations of a quarter point cut in interest rates.

A reduction in interest rates is regarded as adding to inflationary pressure but the GDP figures provided some leeway for another rate cut as the core deflator for personal consumer spending, which excludes food and energy costs, saw its annual rate ease to 2.2% from 2.5% in the final quarter of 2007.