NYT: US Economy Grows 4.2%; War Spending Provides Push

[DeepModem Mom]

U.S. Economy Grows 4.2%; War Spending Provides Push

By LOUIS UCHITELLE
Published: April 30, 2004


The American economy grew at a vigorous annual rate of 4.2 percent in the first quarter, with military spending making a significant contribution to economic growth for the first time since the early days of the war in Iraq.

Consumers provided most of the lift, the Bureau of Economic Analysis reported yesterday. Business investment was also strong, adding more to the growth rate than the military outlays. Without the war spending, however, the gross domestic product would have expanded at an only mediocre pace: 3.5 percent....

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Persistently low interest rates and low inflation, coupled with widespread mortgage refinancing, gave homeowners hundreds of millions of dollars in extra spending power and finally turned a sluggish recovery into a vigorous one over the last nine months. Now those supports are fading, suggesting that the surge in economic growth - the G.D.P. has risen at a 5.5 percent annual rate since October - might not last. And if growth tapers off, so will job creation. Total employment has been rising since August, but is still well below its level in November 2001, when the recovery began.

The Bush administration greeted yesterday's G.D.P. report as confirmation that the president's tax cuts are working. "America's economy is poised for long-term growth," Treasury Secretary John W. Snow said.

John Kerry, the presumptive Democratic presidential nominee, focused not on the G.D.P. report but on the still subpar job creation. "We all know that America is at its best when it's at work," Mr. Kerry said, according to The Associated Press....


http://www.nytimes.com/2004/04/30/business/30econ.html