Sharp Slowdown in Economy

On June 28, the U.S. Commerce Department released its most recent gdp data suggesting that the economy grew at an annual rate of 0.7 percent from January through March—a sharp deceleration from the 2.5 percent annual rate during the last quarter of 2006.

The 0.7 percent climb marked the weakest growth the economy has experienced since a 0.2 percent increase back in 2002.

The significant decline from 2006 was primarily blamed on the slowdown in the housing market. Consumer spending rose by 4.2 percent; however, residential fixed investment, which includes spending on housing, plunged by 15.8 percent.

Although some analysts predict a small rebound during the second quarter, it is likely that as long as the housing market continues to deteriorate, any resurgence will be less than hoped for.

With the fallout from the housing market continuing to make headlines in the subprime lending sector, which appears to be spilling into the corporate sector, financial turbulence might lie ahead.

For a look at the financial storm clouds building on the horizon and how they might strike, read our April 2007 article, “The Coming Storm.”