New figures from the Commerce Department indicate U.S. economic growth probably slowed to a 3.1 percent annual pace in the first three months of 2005.
This first estimate of growth in the gross domestic product was somewhat below analysts' expectations. The 3.1 percent pace is nearly a full point below the growth registered in the fourth quarter of last year. Jim Smith, chief economist for the Industrial Realtors Association, says the slowdown is good news as it will diminish what has been mounting inflationary pressure in the economy.
"If we stay in this year over year 3.5 percent range, that is probably sustainable," he said. "We couldn't stay where we were a year ago, at five percent. And we're not headed [down] for two percent, which would be bad for the global economy."
Economies worldwide have been buffeted by a doubling of oil prices over the past two years. Europe's growth is well below that of the United States and Japan's has recently slowed dramatically. China and India are the fastest growing Asian economies and much of China's growth is attributable to a steady rise in exports to the United States.
Jim Smith, in Chapel Hill, North Carolina, dismisses suggestions that the U.S. economy needs to slow further in order to reduce its volume of imports and record trade deficit.
"If the U.S. slows dramatically, then the whole world's growth rate would come down significantly," he said. "And it is very hard to think of worse news for Latin America, in particular [which relies on exports to the U.S.], than having a gigantic slowdown in the U.S."
The growth figures are unlikely to have any impact on the U.S. central bank, which next week is expected to again raise short-term interest rates. The Federal Reserve has been steadily raising rates, in quarter point increments, since last June.