Economy Booming - Democrats Despondent

[NewXD40fun]

This is the economy the Democrats want to derail by raising Federal taxes.

The Democrats will raise taxes immediately if they gain power in Congress.



U.S. Economic Growth Rises Sharply

By VIKAS BAJAJ
Published: April 28, 2006

The American economy grew at its fastest pace in more than two years in the first quarter of 2006, the Commerce Department reported today, as consumers and businesses spent briskly.

The gross domestic product, the widest measure of the nation's output, grew at an annual rate of 4.8 percent in the first quarter, as Americans bought more computers, furniture and cars. Businesses invested more in office buildings, industrial equipment and transportation equipment, and the government spent more on national defense.

Growth was widespread and appeared to be unhindered, at least thus far, by higher energy prices and rising interest rates. A critical measure of inflation for personal consumption, closely followed by the Federal Reserve, rose at an annual rate of 2 percent in the first quarter, down from 2.4 percent in the fourth quarter of 2005, according to the Commerce Department report. A broader GDP price index was up 3.3 percent, down from 3.5 percent in the fourth quarter.

"Clearly the economy still has plenty of momentum with a little hint of inflation risk in the background," said Ethan Harris, chief United States economist at Lehman Brothers.

Stocks were mixed and bonds fell slightly after the report came out. The Nasdaq composite index and the Dow Jones industrial average were led down by Microsoft, which fell almost 11 percent after warning that it may not meet Wall Street's profits expectations in the coming months.

President Bush said the report showed that the country was "on the fast track" and called on Congress to make his tax cuts permanent. "The surest way to put the brakes on the economy is to raise taxes or spend too much of the taxpayers' money here in Washington," he said at the White House.

Earlier, Senator Jack Reed, Democrat of Rhode Island, said the economic growth, while welcome, was uneven and most workers' wages were not keeping up with inflation. "We can't be satisfied until economic growth provides widespread benefits to American families," Mr. Reed, the ranking member on the Joint Economic Committee, said in a statement.

Economic growth fell slightly short of analysts' forecast of 4.9 percent growth, according to a survey by Bloomberg News, but it was much faster than the 1.7 percent increase registered in the fourth quarter. This is the government's first estimate of growth and the data is typically revised up as more information is collected.

Some economists say at least some of the growth in the first quarter probably reflects a catch-up from the end of last year, when the economy was suffering from the aftershocks of Hurricanes Katrina and Rita. But the growth is expected to slow as that bounce wears off and as higher gasoline prices, which are hovering around $3 a gallon in much of the country, take their toll on consumers and businesses.

Most of the growth came from consumer spending, which jumped 5.5 percent after a muted 0.9 percent increase in the fourth quarter. Investments in construction, equipment and software, which increased by 6.5 percent, added much of the rest.

Analysts say businesses' willingness to spend their rising corporate profits to increase capacity and hire workers marks an important turning point, because the expansion thus far has largely been fueled by consumer spending.

"You have a very healthy corporate sector and it is gradually emerging from its hibernation," Mr. Harris of Lehman said.

The investment is showing up in projects for new factories, offices and hospitals, said Kenneth Simonson, chief economist of the Associated General Contractors of America. "Everywhere people seem to be upbeat and extremely busy," he said.

Spending on nonresidential structures jumped 8.6 percent in the first quarter, from 3.1 percent in the fourth quarter, even as residential construction slowed down slightly to 2.6 percent from 2.8 percent.

The biggest uncertainty for the American economy remains the financial health of consumers. Rising interest rates, which remain near historic lows, could dampen spending. Already, mortgage applications have fallen by more than 20 percent in the last 12 months and home equity loans have flattened out. Higher energy prices could also limit spending on other goods and services.

The University of Michigan reported that its consumer confidence index fell to 87.4 in April from 88.9 in March, reflecting concerns about higher gasoline prices.

Analysts say the impact of higher energy costs and interest rates could be offset by an improving job market and rising wages, but it remains unclear how the two competing forces will play out in the coming months.

Separately, the Labor Department reported today that businesses' employment costs increased by 0.6 percent in the first quarter, down from 0.8 percent in the fourth quarter, as the cost of benefits increased more slowly. Wage expenses rose by 0.7 percent, the same as in the fourth quarter.

http://www.nytimes.com/2006/04/28/bu...rssnyt&emc=rss



Sort of makes you wonder why the polls show low numbers for the President...


Tom