US output rose 0.2 percent in the final three months of 2001, likely ending slump.
Goodbye recession. Hello recovery.
Yes, the economy looks like it's on a roll again. Maybe it's a slow roll, but it's a roll.
The government supported this view yesterday with its first look at the nation's fourth-quarter gross domestic product (GDP), which showed a positive growth of 0.2 percent. If this number is not revised downward by much, it will mean that the recession was one of the shallowest in modern times.
The fact that the economy finished the quarter in the black surprised most economists, who had expected the period to record a 1 percent drop after a decline of 1.3 percent in the prior quarter. But consumers, resilient as ever, reached deeper into their pockets than expected. In addition, government spending surged at a near double-digit pace - helped by a step-up in spending on the war and homeland defense.
Although economists expect consumer and government spending to slow in the current quarter, business should start to take up some of the slack by restocking its inventories.
"It will add as much as 5 percentage points [on an annual basis] to the current quarter," says Sung Won Sohn, chief economist for Wells Fargo Banks in Minneapolis. "I am almost sure the recession has ended and the recovery has begun."
The prospect that the economy is moving forward also means that the Federal Reserve, after 11 rate cuts, will likely not pare interest rates any more in the months ahead. The Fed ended a two-day meeting yesterday after the Monitor went to press.
In the past few days, several economic statistics have been supporting the view that growth may be back on track. On Monday, the Conference Board reported that consumer confidence had improved once more. Then, on Tuesday, the government reported that durable goods showed a modest increase as firms started to replenish warehouses.
But tomorrow, the government will report the January unemployment rate, which is likely to show another uptick. "Jobs may be the ultimate determination of when this recession is officially over," says Mark Zandi of Economy.com.
Indeed, the downturn continues to take its toll on corporate America. On Monday, Global Crossing, a once high-flying telecommunications company, declared bankruptcy. This follows the collapse of Enron, the Houston-based energy company.
According to the American Bankruptcy Institute, corporate failures rose 16.1 percent in the third quarter of 2001, compared with the third quarter of 2000.