U.S. GDP Weak, 'No Doubt The Economy Has Slowed'

WASHINGTON: Corporate profits contracted in the first quarter for the first time in more than two years and the economy grew at the same pedestrian pace as previously estimated, government data showed on Thursday.

Signs of the economy's struggle to regain speed were highlighted by an unexpected rise in the number of Americans applying for unemployment benefits last week.

"There is no doubt the economy has slowed. We will call the first half of 2011 as a soft patch," said Robert Dye, a senior economist at PNC Financial Services in Pittsburgh. "We should see growth accelerate in the second half in the 3.0 percent to 3.5 percent area."

After-tax corporate profits fell at a rate of 0.9 percent, the Commerce Department said, after rising at a 3.3 percent pace in the fourth quarter.

In its second estimate of the economy, the department said gross domestic product growth was unrevised at annual rate of 1.8 percent, below economists' expectations for a 2.1 percent pace.

The drop in profits, the first since the fourth quarter of 2008, likely reflected a slowdown in productivity growth as businesses stepped up hiring. Economists had expected corporate profits to grow at a 2.3 percent pace.

However, the rise in initial claims last week suggested the pace of hiring might be slowing. Initial claims for state unemployment benefits climbed to 424,000 from 414,000 the prior week, a separate report from the Labor
Department showed.

Economists had forecast claims slipping to 400,000. Last week marked the seventh straight week in which claims topped the 400,000 level.

Stock index futures remained unchanged while bond prices shed losses and turned positive. The dollar extended losses versus yen.

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[drava32000]

07:24 PM on 05/26/2011

I think the Fed is lying about even the lousy reported GDP
growth of 1.8%.. I want to know in exactly what areas of the Economy was there any "growth" that is spending??

[dubski]

12:27 PM on 05/26/2011

It's a false recovery. Corporations have grown fat off the rationalization of their costs, cutting back everything not nailed down, including people. Corporations were able to amass hoardes of cash, especially as the stock market soared with investors searching for yield in the low interest rate environment.

But suddenly nothing else can be cut, and it comes down to sales, as always. And with unemployment sticking around at high levels, people aren't necessarily spending any more than they were in the downturn. So corporations are going to take a hit, like everyone else. It's a vicious cycle, and likely to only get worse, especially as the housing market continues to shake out shadow inventory. The government's rickety edifice propping up the economy is only a soft breeze away from crumbling.

[fineartgalaxy]

01:03 PM on 05/26/2011

There is no recovery because this is not an economy issue. It is an issue of criminal activities. And there is nothing in place to prevent this situation from taking place again.

[Steve Rockett]

12:17 PM on 05/26/2011

It is all recovery. Now the big corporations need to step and start hiring Americans so they have more consumers of their products. It is the right thing to do to remain competitive and support their country.

[fineartgalaxy]

01:01 PM on 05/26/2011

And if you think Corporations will be doing the right thing as opposed to the profit thing, well, good luck to you.

[Silverwolf72]

01:03 PM on 05/26/2011

All the layoffs were a short turn fix that causes a long time problem

[OhManOhMan]

12:07 PM on 05/26/2011

jobs shipped over seas

CEOs greed

politicians love wars - profits

usa is a sell out

now it's no wonder that economy is slow..

[OldTulsan]

12:00 PM on 05/26/2011

People are spending more for necessities...

http://noir.bloomberg.com/apps/news?pid=20601087

[vippy]

11:43 AM on 05/26/2011

http://blog.bmgbullion.com/economy/why-the-us-gdp-numbers-may-be-as-bogus-as-a-three-dollar-bill/

[frank day]

11:43 AM on 05/26/2011

We must need more Tax Cuts and more slashing of jobs.

Yeah, thats the way to do it. Go GOP! ( really, please go)

[vippy]

11:41 AM on 05/26/2011

What garbage - the economy never picked up and the headlines were misleading with negatives stories all around. Bush had started this "positive news push" and this administration is continuing.

[BigDaddyWow]

11:41 AM on 05/26/2011

Sure, of course it's slowing. American resolve does have it's limits and we are going into our 4th year of crap economy. Apparently Libya is more important that our economy. We can't cut spending. Banks not lending to small business. The financial sector is aggressively looking for new bubbles to inflate. China isn't beating us; we are giving it away. The solutions are simple but politics trumps the health of America. Something disruptive needs to happen to get our governments eyes back on the ball.