Slowing U.S. economy saps corporate profits

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Slowing U.S. economy saps corporate profits

Reuters, 03.29.01, 8:41 AM ET

WASHINGTON, March 29 (Reuters) - The U.S. economy grew at its weakest rate in 5-1/2 years during the closing quarter last year, sapping corporate profits, the Commerce Department reported on Thursday in a report likely to fan concern that the mighty U.S. economic engine was running out of steam.

Gross domestic product or GDP, which measures total national economic output within U.S. borders, was revised down to a 1 percent annual rate of expansion from a previously reported 1.1 percent as companies scaled back production and investment in the face of weaker growth in consumer spending.

That was down from a 2.2 percent rate of expansion in the third quarter and was the softest for any three months since GDP grew at 0.8 percent rate in the second quarter of 1995. Wall Street economists had forecast that fourth-quarter GDP growth would remain at 1.1 percent rather than be revised down.

The Federal Reserve has cut interest rates aggressively this year, dropping them three times by a half percentage point each time since the beginning of January, in a bid to pep up a sluggish expansion and stave off potential recession.

Still, some analysts worry that GDP may have stalled early in 2001, or barely edged ahead, as businesses struggle to work down overstocked inventories.

The economic slowdown hit company balance sheets as after-tax profits shrank for the first time in two years, down 4.3 percent to an annual rate of $626.4 billion after growing 0.6 percent in the third quarter. It was the first time since the fourth quarter of 1998, when profits decreased 1.6 percent, that businesses reported smaller earnings than in the prior quarter.

Rtrs08:41 03-29-01

http://www.forbes.com/newswire/2001/03/29/rtr223933.html;$sessionid$R40YWVYAADKF3QFIAGVSFFQ

-- Martin Thompson (mthom1927@aol.com), March 29, 2001


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