Newspaper article THE JOURNAL RECORD

Economy's Slowdown Viewed Optimistically

Newspaper article THE JOURNAL RECORD

Economy's Slowdown Viewed Optimistically

Article excerpt

WASHINGTON (AP) _ Slowing from last year's booming pace, the economy was weaker in the first quarter this year than it has been for 18 months, a change welcomed by analysts.

The Commerce Department said Wednesday that gross domestic product, the government's most comprehensive economic yardstick, grew at a 2.7 percent annual rate in the first three months of 1995. That is just over half the 5.1 percent rate of expansion for the final quarter last year. The numbers are seasonally adjusted.

Analysts said that although the economy probably will prove to be even more sluggish in the current quarter, the new figures are encouraging and point to moderate growth and low inflation.

"It's good news. It probably means we're going to enjoy the economy as we see it for some time," said David Munro of High Frequency Economics, a New York City forecasting firm.

A month ago, the government estimated that GDP grew at a 2.8 percent rate in the first quarter. The downward revision Wednesday showed that inventory buildup was actually less than previously reported, while consumer spending and business investment were stronger.

That combination suggests the accumulation of goods on shelves and backlots will be less of a drag on the economy later this year, analysts said.

"This is clearly a soft-landing forecast. Whether the reality is the same remains to be seen," said David Wyss of DRI-McGraw Hill, a Lexington, Mass., forecasting firm.

In another report, the Commerce Department said sales of new homes slipped 2.7 percent in April, the second drop this year, despite steadily falling mortgage rates. Purchases were down in all regions except the Midwest.

Analysts said they expect home buying to rebound later this year and spearhead a pickup in economic momentum.

"It's pretty clear that consumers are retrenching," said Sung Won Sohn of Norwest Corp. in Minneapolis. "The economy is slowing down. Hopefully, it will hit bottom late this summer and then rebound. …

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