"We've been watching the wrong speedometer. We haven't covered
the mileage we thought we had," said economist Sung Won Sohn of
Norwest Corp. in Minneapolis, a bank holding company.
WASHINGTON (AP) _ Although the economy shifted into reverse in
the spring, new government figures point toward a mild recovery
that analysts say may postpone further cuts in interest rates.
The government said Wednesday the economy actually shrank in
the second quarter, its first decline in more than four years.
But analysts said other signs _ particularly rising home sales _
should put to rest any lingering recession fears.
The Commerce Department also said its Index of Leading
Economic Indicators, its main forecasting gauge, broke a
four-month losing streak in June to advance by 0.2 percent. It
was the first gain this year for the index.
The stock market, which soared in early trading after the
Federal Reserve and Japan teamed up to support the U.S. dollar,
closed with a loss after a late wave of profit taking. The Dow
Jones industrial average, which gained more than 55 points at its
peak, ended the day with a loss of 10.22 points.
The dollar, meanwhile, was at a four-month high against the
yen, sending U.S. interest rates lower.
Commerce reported that new-home sales, a barometer of where
the economy is headed, climbed 6.1 percent in June to the highest
level in a year and a half. Helped by falling mortgage rates,
sales increased in every region of the country.
"Consumers seem to know that things weren't that bad out
there," said Stanley Duobinis, chief forecaster for the National
Association of Home Builders. "They're responding to better
Ironically, the Commerce Department issued a new method of
measuring growth that showed the economy fared worse in the
second quarter than previously estimated.
Gross domestic product, measuring all goods and services
produced in the United States, fell 0.2 percent in the April-June
quarter. Just last Friday, using the traditional method, the
department said the economy grew 0.5 percent over the three
The latest GDP figure _ designed to factor in falling prices
in recent years for computers and other high-tech goods _
declined for the first time since a 2.1 percent drop in the first
quarter of 1991.
The new system also showed that growth during last year's
robust expansion wasn't as strong as previously thought. …