Housing, Spending Weigh on U.S. Economy

Washington, D.C.–The housing decline and low consumer confidence hampered the economy in the first three months of 2008–but inventory growth and exports helped prevent a contraction, the Commerce Department said on Wednesday.In the first quarter, the gross domestic product increased at a 0.6 percent annual rate.But the economy slowed. G.D.P. had grown at a 4.9 percent page in 2007’s third quarter–before the subprime fallout began spreading past the mortgage sector, the New York Times reports.After declining 25 percent at the end of 2007, the residential sector fell at a 26.7 percent annual rate in the first quarter. Housing market issues cut 1.2 percent off of the total growth rate.Consumers avoided large-scale purchases in the first quarter and spent less, driving consumption to a 1 percent annualized rate of growth–the smallest increase since the second quarter of 2001. Compared to the last quarter of 2007, consumption fell 2.3 percent.But business inventories increased by $1.8 billion, making them the biggest contributor to growth in the quarter–however, because consumer demand is slowing, production may decline in the coming months, according to the Times.Due to rising oil and food costs, overall prices increased at a 2.6 percent annual rate. Inflation–excluding food and energy expenses–grew at a 2.2 percent annual rate.