GDP Report Shows Growth In Latest Quarter

In this most recent quarter, the overall economy grew at a relatively strong rate of 1.9 percent. That's according to the latest report on gross domestic product, the measuring stick for economic growth. The government stimulus package helped in the latest quarter, but the picture wasn't as pretty for the past year.

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Also in the recent quarter, the overall economy grew at a relatively strong rate of 1.9 percent. That's according to the latest report on gross domestic product. But don't get too excited, as NPR's Chris Arnold reports.

CHRIS ARNOLD: The GDP report is the measuring stick for economic growth, and while this latest quarter showed that the federal stimulus package helped, the picture wasn't as pretty for the past year. The government says in the fourth quarter of '07 the economy actually dipped into negative territory, with GDP falling .2 percent.

Nariman Behravesh is chief economist at Global Insight.

Mr. NARIMAN BEHRAVESH (Global Insight): Well, this particular release can only be characterized as bad news in the sense that certainly the negative number that we had for the fourth quarter of 2007 suggests that the economy probably entered something, either a recession or close to a recession, earlier than I guess a lot of people had thought.

ARNOLD: And there are still a lot of economic headwinds here. Oil prices are still at very high levels. The housing market keeps deteriorating. Some 700,000 homes a year are being dumped on the market through foreclosures. That drives down prices further and hurts consumers' willingness to spend.

Mr. BEHRAVESH: Going forward, as the stimulus, the effects of the stimulus wear off, we expect the economy to weaken considerably, so that by the fourth quarter we'll probably be back in negative territory.

ARNOLD: Behravesh expects a recession, but he thinks it'll be a mild one, similar to what we saw in 2001. He says what will really bring the economy out of the woods will be a turnaround in the housing market. The longer trouble drags on there, the more damage to the economy.

Christ Arnold, NPR News.

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