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By Shobhana Chandra
April 30 (Bloomberg) -- The U.S. economy probably grew in the first quarter at the slowest pace in five years as consumer and business spending faltered and the housing slump deepened, economists said before a government report today.
A 0.5 percent annual pace of growth from January through March, the smallest gain since the last three months of 2002, is the median estimate of 80 economists surveyed by Bloomberg News.
``I'd probably call it a recession,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York. ``It's a pretty bad environment that is unlikely to get better any time soon. The consumer is on very shaky footing.''
Spending by households, the biggest part of the economy, probably grew last quarter at the slowest pace in 13 years as job losses mounted, food and fuel prices surged and property values tumbled. Federal Reserve policy makers are forecast to cut the benchmark interest rate today to limit the downturn.
The Commerce Department's report on gross domestic product, the volume of all goods and services produced, is due at 8:30 a.m. in Washington. The economy grew at a 0.6 percent pace in the last three months of 2007.
Projections in the survey ranged from a gain of 1.5 percent to a 0.8 percent drop. Today's estimate is the first for the quarter and will be updated in May and June as more information becomes available.
Other reports are forecast to show companies reduced payrolls in April and business activity contracted.
Consumer spending probably rose at a 0.7 percent annual rate last quarter, a third the pace of the previous three months and the smallest gain since 1995, according to the median forecast.
Jobs, Fuel, Housing
Americans have retrenched as employers cut payrolls by almost a quarter million workers so far this year, gasoline prices approached $4 a gallon and home foreclosures surged.
The economy would have contracted last quarter if not for an increase in inventories that was probably caused by the slowdown in sales. The buildup may give way to cutbacks in production in coming months as businesses try to work off unwanted stockpiles.
Accumulation of inventories probably added 1.7 percentage points to growth, according to estimates by economists at Lehman Brothers Holdings inc. in New York. Without that boost, the economy shrank at about a 1 percent pace, Lehman's estimates showed.
``What is good news for the first quarter will actually be bad for the second in this case,'' Drew Matus, a senior Lehman economist, said in an interview on Bloomberg Television yesterday. Companies will ``cut back on production much more aggressively.''
Private Surveys
At 8:15 a.m., a report from ADP Employer Services may show companies cut 60,000 workers from payrolls in April.
A report from the National Association of Purchasing Management-Chicago, due at 9:45 a.m. New York time, may show business at its member companies shrank at a faster pace this month, according to the survey median.
The drag from housing probably intensified last quarter and will probably continue to hurt growth most of this year. Declines in residential construction have subtracted from economic growth since the first three months of 2006, culminating in a 25 percent drop last year that was the biggest since 1980.
Firms are girding for slower demand and tougher credit conditions. General Electric Co. last week raised its cost- cutting goal for this year by 50 percent and said it will push to sell underperforming divisions.
`Difficult Times'
``Days of easy credit have turned into months of no credit at all,'' Chief Executive Officer Jeffrey Immelt said April 23 at GE's annual shareholders meeting. ``While I am confident about the economy long term, we could see even more difficult times ahead.''
The deterioration in housing, employment and consumer purchases prompted Fed Chairman Ben S. Bernanke this month to concede for the first time that a recession is possible.
The economy lost jobs for a fourth consecutive month in April, according to estimates by economists. The Labor Department will issue the monthly employment report in two days.
Investors are betting the Fed will take a breather from its series of rate cuts after today's action, according to trading in futures markets, on growing concern inflation will accelerate as food and fuel costs rise. The GDP report may show prices increased at a 3 percent annual rate last quarter, the biggest gain in a year.
Policy makers may also want time to gauge how the economy reacts to the rate reductions that started in September and to the tax rebate checks that began going out this week as part of the Bush administration's fiscal stimulus plan.
``Inflation remains uncomfortably high and the Fed wants to see whether the financial system has stabilized,'' said Mark Zandi, chief economist at Moody's Economy.com in West Chester, Pennsylvania. ``It is reasonable to expect rates will stay on hold.''
One area of the economy that remains a bright spot for growth is net exports. The trade deficit probably shrank from January through March for the fourth consecutive quarter.
Bloomberg Survey
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ADP GDP Personal Chicago
Payroll Annual Consump. PM
,000's QOQ% QOQ% Index
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Date of Release 04/30 04/30 04/30 04/30
Observation Period April 1Q A 1Q A April
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Median -60 0.5% 0.7% 47.5
Average -65 0.4% 0.6% 47.6
High Forecast -20 1.5% 0.9% 50.0
Low Forecast -115 -0.8% -0.1% 45.0
Number of Participants 25 80 7 60
Previous 8 0.6% 2.3% 48.2
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4CAST Ltd. -60 0.4% --- 46.0
Action Economics -40 0.8% --- 49.0
AIG Investments --- 1.0% --- 49.5
Aletti Gestielle SGR --- -0.1% 0.8% 46.7
Allianz Dresdner Economic --- 1.2% --- 46.0
Argus Research Corp. --- 1.4% --- 50.0
Banc of America Securitie --- 1.2% --- ---
Bank of Tokyo- Mitsubishi --- 1.2% --- 47.2
Bantleon Bank AG --- 0.5% --- 47.5
Barclays Capital --- 0.0% --- 47.5
BBVA -20 1.0% --- 48.0
Bear, Stearns & Co. --- 0.7% --- 47.0
BMO Capital Markets -60 0.3% --- 48.0
BNP Paribas -115 -0.2% --- 45.0
Briefing.com --- 0.7% --- 49.0
Calyon --- 0.3% --- 47.0
CEMEX --- --- --- 47.0
CFC Group -30 -0.4% --- 47.6
CIBC World Markets --- -0.2% --- ---
Citi --- 0.8% --- 47.5
ClearView Economics --- 0.6% --- ---
Commerzbank AG --- 0.2% --- 47.0
Credit Suisse --- 0.4% --- 50.0
Daiwa Securities America --- 0.3% --- ---
Danske Bank -65 0.5% 0.5% 48.0
DekaBank --- 0.7% --- 46.0
Desjardins Group --- -0.1% --- 47.0
Deutsche Bank Securities --- 0.5% --- 47.5
Deutsche Postbank AG --- 0.8% --- ---
Dresdner Kleinwort --- -0.3% --- 46.0
DZ Bank -75 0.3% --- 46.0
First Trust Advisors --- 1.5% --- 47.3
Fortis --- 0.3% --- 48.5
Global Insight Inc. --- 0.8% --- ---
Goldman, Sachs & Co. -100 0.2% --- 47.5
H&R Block Financial Advis -70 -0.2% --- 48.0
Helaba --- 0.5% --- 48.0
High Frequency Economics -25 1.5% --- 45.0
Horizon Investments --- 0.5% --- ---
HSBC Markets -65 1.0% --- 47.0
IDEAglobal -60 -0.5% -0.1% 47.3
Informa Global Markets -45 -0.2% --- 47.5
ING Financial Markets -100 0.9% --- 47.5
Insight Economics --- 0.5% --- 47.5
Intesa-SanPaulo --- 0.2% --- 48.0
J.P. Morgan Chase --- 0.7% 0.7% 47.0
Janney Montgomery Scott L -75 -0.2% --- ---
JPMorgan Private Client --- 0.5% --- 48.8
Landesbank Berlin --- 0.2% --- 48.0
Landesbank BW --- 0.5% --- 47.0
Lehman Brothers -70 0.7% --- 49.0
Lloyds TSB --- 0.5% 0.8% 48.0
Maria Fiorini Ramirez Inc --- 0.5% --- ---
Merrill Lynch -55 1.1% --- 47.5
Moody's Economy.com --- 0.2% --- 47.5
Morgan Keegan & Co. --- 0.5% --- ---
Morgan Stanley & Co. --- 0.3% --- ---
National Bank Financial --- -0.1% --- ---
National City Corporation --- 1.5% --- 45.5
Natixis -115 0.8% 0.4% ---
Newedge --- -0.1% --- 47.6
Nomura Securities Intl. -25 0.2% --- 48.0
Nord/LB --- -0.8% --- 48.0
PNC Bank --- 0.3% --- ---
RBS Greenwich Capital --- 0.5% --- ---
Ried, Thunberg & Co. -100 0.5% --- 49.0
Scotia Capital -50 0.0% --- ---
Societe Generale --- 0.3% 0.9% 50.0
Standard Chartered --- 0.0% --- ---
Stone & McCarthy Research --- 0.0% --- ---
TD Securities --- 0.5% --- ---
Thomson Financial/IFR --- -0.2% --- 48.5
Tullett Prebon --- 0.4% --- 48.0
UBS Securities LLC --- 0.0% --- 47.5
Unicredit MIB --- 0.5% --- ---
University of Maryland -50 -0.6% --- 48.5
Wachovia Corp. --- 0.7% --- ---
Wells Fargo & Co. --- 0.3% --- 48.0
WestLB AG -60 0.0% --- 47.8
Westpac Banking Co. --- 0.4% --- 46.0
Wrightson Associates -100 0.5% --- 49.0
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To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
Last Updated: April 30, 2008 00:01 EDT
