Economy slowed by high gas prices, bad weather
Photo
In this April 15, 2011 photo, a motorist, who only wished to be identified as Pablo, fills up at a Shell gas station in Seattle. The economy slowed sharply in the first three months of the year as high gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.
WASHINGTON — The economy slowed sharply in the first three months of the year. High gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.
The 1.8 percent annual growth rate in the January-March quarter was weaker than the 3.1 percent growth in the previous quarter, the Commerce Department reported. And it was the worst showing since last spring when the European debt crisis slowed growth to a 1.7 percent pace.
Federal Reserve Chairman Ben Bernanke and other economists say the slowdown is a temporary setback. They generally agree that gas prices will stabilize and the economy will grow at a 3 percent pace in each of the next three quarters.
But gas prices are still going up. The housing market has shown little signs of recovering. And lawmakers are proposing some of the steepest cuts in federal spending in a generation. Those cuts would filter down to state and local governments, which are already wrestling with their own budget crises.
"The economy has lost its modest upward momentum, and headwinds such as rising gasoline prices and further budget cuts suggest the recovery will continue at only a moderate pace going forward," said Sal Guatieri, senior economist at BMO Capital Markets.
The national average for a gallon of gas was $3.88 on Thursday. That's an increase of 30 cents in the first month of the April-June quarter.
An inflation gauge in the report showed consumer prices rose last quarter at the fastest pace in nearly three years. Most of the increase came from higher fuel costs.
Rising gas prices are draining most of the extra money that Americans are receiving this year from a Social Security payroll tax cut.
That's a major reason why consumer spending cooled off in the January-March quarter. Consumers boosted spending at a 2.7 percent pace, down from the previous quarter's 4 percent pace and the weakest since last summer. Consumer spending is important because it accounts for roughly 70 percent of overall economic activity.
"All things considered, it could have been worse," said economist Paul Dales at Capital Economics. Even though consumers spent less, the pace of spending by historical standards is decent. "Nevertheless, in a quarter when the economy began to benefit from additional monetary and fiscal stimulus, we had originally expected a lot more," he said.
Pump prices weren't the only reason spending slowed. Harsh winter weather also kept people from shopping in many parts of the country.
Winter storms — including rare snow that blanketed the South — also forced builders to delay construction projects, a big factor holding back overall economic activity. Builders slashed spending on commercial construction, such as office buildings and factories, at a 21.7 percent annualized pace, the deepest cuts since late 2009.
Residential construction was also affected. Builders cut spending on housing projects by a 4.1 percent annualized rate.
The housing market's collapse thrust the economy into a deep recession, and economists say it will take years for the industry to heal. Two years after the recession has ended, the housing market remains depressed.
Bernanke suggested at a news conference Wednesday that the crippled housing market will continue to drag on economic growth. He pointed out that home building and commercial construction were both "very weak" in the first quarter. Normally, construction spending is much stronger at this stage of an economic recovery.
The government is also spending less. The federal government cut military spending at an annualized rate of 11.7 percent last quarter — the deepest cut since 2005.
Bernanke and other economists expect government defense spending and consumer spending will rebound in the next quarter.
Economists in a new Associated Press survey predict the economy is growing at a 3.2 percent pace this quarter and that growth will steadily improve over the remainder of the year.
One concern is the rise in prices. An inflation gauge tied to the report showed that consumer prices rose at an annual rate of 3.8 percent. That's the biggest gain since the summer of 2008, when gasoline prices hit a record high of $4.11 a gallon nationwide.
Stripping out energy and food prices, inflation rose at a rate of 1.5 percent. That's at the low end of the range of inflation the Federal Reserve believes is needed for a healthy economy.
Apr 29, 2011 at 2 p.m.
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mouse-As usual a none answer from you. Would you want him doing your checkbook? Its easy- Yes or No.
Apr 29, 2011 at 11:01 a.m.
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The majoity of people in this country know nothing but "superbowl", "nascar", "idol", "ncaa","dancing stars" and similar meaningless idiocy......Nor do they care to know.
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No one ever said more truth than when they said Americans(by-and-large) were stupid and lazy.
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Politicians know fully that they are free to destroy the country at-will for their own self-interest and it is quite evident they are taking full advantage.
Apr 29, 2011 at 10:15 a.m.
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mespl- I disagree that the people are responsible for our astronomically lopsided and unfair foreign trade.
You can't "buy American" when EVERY politician plots and schemes every day to have our industy and jobs shipped out of the country because there is nothing "American" left to buy.
"The people" just do not have the power that crooked politicians have no matter how much we try to "buy American", there is no way to overcome politicians.
They're ALL crooks and no one seems to care enough to try to do anything about it.
Politicians keep on pulling the flusher and everyone just says "oh well".
Apr 29, 2011 at 9:53 a.m.
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Truth: I agree with you on the trade issue. Obama is making more trade deals that will hurt the people of this country, as did Bush and Clinton. It is not a partisan issue no matter how much people on both sides want it to be. Both sides are guilty for us being in this mess we are in. But guess what in the end it is all of us who have dug this hole we are in. Every time someone buys something which is made in a third worlds country they are putting their neighbors out of work. They use the excuse that it is too expensive to pay someone a living wage well if we demanded American made products we would get it, but the vast majority of Americans don’t care about one another and can’t see the damage they are doing to their fellow citizens. It is sad that we are not willing to fight for each other instead we don’t care until it is our job being shipped overseas. BTW: I am not speaking from experience I am not a person who is sore over losing a job to be shipped overseas, I simply am smart enough to look at these deals and see how they have directly affected our economy and our neighbors. I try to buy American made products whenever possible and spend a great deal of time researching where products are made. I have chosen to live while consuming less quantity so that I can do my part to help make sure my neighbors make a living wage and can afford to feed their families. I am neither republican nor am I a democrat; I agree with parts of both parties and disagree with other parts. But like you said both parties are guilty of selling out America to the cheapest bidder.
Apr 29, 2011 at 9:21 a.m.
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If the devalued dollar alone were responsible for high gas/oil prices, then we could say that oil company profits were a direct result of the devalued dollar.
I can't see how oil companies make massive profits from the singular cause of the dollar being devalued.
That just doesn't make sense, but maybe I can be enlightened..I'm willing to listen.
As far as the trade issue, wasn't it Clinton that made china- "most favored nation trader" with the USA?....I think it was as well as signing nafta.
For the most part, politicians of all stripes do little other than damage..They care only for themselves.
Apr 29, 2011 at 4:16 a.m.
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If it was still 2008 the gas prices would be the fault of the white house, according to pelosi; different times mean the blame shifts.
http://articles.cnn.com/2008-07-17/polit...
Apr 29, 2011 at 1:17 a.m.
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Just ignore how purchasing government debt, by the government, deflates the dollar; in essence the same as printing money, otherwise known as quantitative easing (QE1 and QE2). Yes ignoring facts is very prevalent here.
Apr 29, 2011 at 12:25 a.m.
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I know of a nice beachfront that I would like to send these speculators to. It's called Guantamano Bay. Think of it. Habeus Corpus has been suspended. Take them there and throw away the key.
Apr 28, 2011 at 9:13 p.m.
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mespl's 4:54 post should be required reading. Nice job. Unfortunately people like to ignore the facts in favor of their beliefs. As we see with the birthers.
Apr 28, 2011 at 8:52 p.m.
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If you wonder why the economy is in the tank ask yourself one question-Would you let the guy running Obama's Treasury Dept., Tim Geithner, balance your checkbook? Would you?
Apr 28, 2011 at 5:21 p.m.
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grandys--According to both U.S. Oil Industry and U.S. Government tables, 10 years ago, in 2001, the average price of a barrel of oil was $23.00; when adjusted for today's rate of inflation, it was $28.32. Don't bother to let the facts get in the way of your left-hatred and your childish whoppers. I will not let a one of your "facts" go unchecked now that we have seen the depth of your dishonesty.
Apr 28, 2011 at 5:15 p.m.
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Hey Koch Bros, How can I make money from high gas prices and bad weather? (I love this guys answers.)
Apr 28, 2011 at 4:54 p.m.
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“ President Obama has printed alot of money with no backing.” To be completely honest Obama dose not print any money the U.S. Bureau of Engraving and Printing takes care of that. Also last year 95% of the money printed was to replace currency which was removed from the market. Furthermore if you go to the U.S. Bureau of Engraving and Printing website you can look up the annual and even monthly printing reports. I only looked at annual because I didn’t want to put too much time into your uninformed ranting. You stated “Ten years ago oil was $10.00 a barrel, if you would try to buy that same barrel of oil with todays dollar it would cost you $21.00. It is called a devalued dollar, thank you President Obama.” Well if you are claiming that the dollar is devalued because of excessive printing compared to ten years ago that is a complete falsehood. In 2009 the United States printed paper money worth a grand total of $200,908,800,000 yes I added it all up. Whereas ten years prior in 1999 the United States printed paper money worth a grand total of $250,771,200,000. A larger value of money was printed ten years ago compared to today. Perhaps the dollar is devalued because it needs to be to compete when we are signing all of these free trade deals with third world countries! Also mind you people buy and sell U.S. Dollars similarly to the way that oil is traded. When there is not much faith that the U.S. market will recover there is not much desire to own stock in U.S. dollars. Manufacturing in this country has been in a constant decline for the past twenty years because of all of the trade agreements. You cannot create a strong economy without an industrial base to build off of. That is why many countries like Germany have National Industrial Policies. If people felt that the economy in this country would recover then the dollar would be stronger, however that feeling is not there for many reasons, however one strong reason is the fact that we manufacture less and less in this country every month.
Apr 28, 2011 at 4:51 p.m.
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Grandys...brushin the dust off that history book? Nah, didn't think so
Apr 28, 2011 at 4:48 p.m.
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And, again, thanks for accepting me as your Lord. I haven't yet decided if you can measure up as one of my minions, but, hey, Lords need floor-sweepers, too.
Apr 28, 2011 at 4:46 p.m.
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grandys--Boy, grandys...things are sure simple in your world. But mespl and I don't live in the tiny little world of your alibi-making, blame-assigning, left-hating (ya, ya--I read the part about your devotion to the Kennedys and the Democrats...sorry, not buying one word of it). We live in the real world. As for my not being a Kennedy Democrat...every friend I have in the world is laughing their hind-end off at you right now. You don't know why, but thanks for one of the best laughs ever! What you don't know but have convinced yourself that you do is incredible!
Apr 28, 2011 at 4:44 p.m.
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grandys...$10 a barrel?!?!?! $21 a barrel?!?!?...c'mon dude you really can't just make stuff up. Ur better than that...right?
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Apr 28, 2011 at 4:40 p.m.
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Damn that Obama!!!...another non-citizen president printing money in the basement of the white house! I thought we took his printing press away.
NEWS FLASH...the last president to go nuts printing money was none other than JFK's very own vice president and successor LBJ.
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NEWS FLASH...The president of the u.s. does not individually control monetary policy and the prez that took us of the gold standard was Richard Nixon.
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NEWS FLASH...oil prices are determined at the board of trade and based on trading volume of futures contracts and speculation on supply and anticipated demand. About the only thing a sitting prez can do to impact oil prices is to open up the national petroleum reserves. Oh, and natural disasters can make the price of oil rise as well...Damn that Obama for not stopping those tornadoes down south!!!!
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Why do I keep referencing actual history...when makin stuff up would be so much easier ????
Apr 28, 2011 at 3:18 p.m.
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mespl--If you're waiting for grandys to make an honest claim about ANY Democrat, you have a LONG wait ahead of you. He doesn't have it in him. If he can't blame the Democrats for something the neocons have done, his whole day has gone to waste.
Apr 28, 2011 at 2:13 p.m.
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Grandy: Really Obama controls gas prices? That is news to me because I was under the impression that gas was a commodity which was bought and sold by investors who are speculating over the future value.
Apr 28, 2011 at 2 p.m.
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i'll take the blame for high gas prices. I've stopped buying my milwaukee's best ice at gas stations. They have to make it up somewhere.
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