WASHINGTON — New statistics Friday showed the nation's economy trundling along at a painfully slow pace. The economy grew at a weaker-than-expected 1.3% annual rate during the first three months of the year, and existing-home sales and durable goods orders tumbled in April.
The growth figure was a downward revision of an already anemic 2% annual rate that the government announced last month. A year ago, the economy was growing at a nearly 5% annual clip.
The portrait that emerged was one of an economy that continues to drag despite a swift 2.5-percentage-point cut in interest rates by the Federal Reserve this year.
"We're on a path of very slow growth for some time to come," said Michael J. Moran, chief economist of Daiwa Securities America Inc.
Investors reacted to the latest signs of weakness by driving down stock prices. The Nasdaq composite index fell 30.99 points, or 1.4%, to close at 2251.03. The Standard & Poor's 500 index dropped 15.28, or 1.2%, to 1277.89. The Dow Jones industrial average declined 117.05, or 1.1%, to 11,005.37.
But consumers generally have behaved as if the economy's worst troubles have passed.
A University of Michigan survey issued Friday found consumers more upbeat about their finances and economic prospects this month than they were in April. The university's index of consumer sentiment ended the month at 92, up from 88.4 in April. The index had fallen steeply from last year's highs.
Meanwhile, Fed Chairman Alan Greenspan said in a Thursday speech that American businesses have worked off much of their unwanted inventory and could soon be ready to expand again.
Greenspan warned that "the period of subpar economic growth is not yet over."
But, in a sign that the central bank feels free to keep cutting rates to revive growth, he also said that inflation posed almost no danger to the economy.
The Fed chairman coupled his remarks with an encomium to high technology, which he believes has helped bolster the economy since the mid-1990s.
"By all evidence," he told the Economic Club of New York, "we are not dealing with maturing technologies that, after having sparkled for a half-decade, are now in the process of fizzling out."
But if the future looked bright, the latest crop of government statistics showed the immediate past was murky.
Analysts said the downward revision in the growth of the gross domestic product, the total of all goods and services produced in the United States, showed that businesses slashed investments and inventories more aggressively than previously thought. Most private economists had predicted a revision to about 1.5%.
Business investment in equipment and software, which had been rising at double-digit rates, slumped to a 2.6% annual rate in the first quarter. Coming atop an even steeper 3.3% decline in the October-through-December quarter last year, the tumble poked a hole in "new-economy" hopes for an ever-upward spiral of greater investment, efficiency, output and wealth.
The government originally thought that companies trimmed stockpiles at a $7.1-billion annual rate but has concluded that they cut at a much faster $18.9-billion pace.
The downward revision of GDP means that the economy has been expanding at an extraordinarily weak 1.4% pace during the last six months, its slowest rate since the end of the last recession in 1991.
In other signs of economic weakness Friday, government and industry groups reported that:
* Orders for durable goods--those designed to last three years or more--fell an unexpectedly steep 5% in April because of shrinking demand for aircraft, computers and autos. The decline followed increases in demand of 2.2% in March and 3.9% in February. Analysts had predicted about a 2% decline for last month.
* Sales of existing homes declined 4.2% in April to a seasonally adjusted annual rate of 5.2 million units. The lower rate was still well ahead of the 4.98-million-unit sales rate of a year ago.
April sales of existing homes in California were slightly stronger than national sales, rising 0.5% to a seasonally adjusted rate of 495,390, up slightly from 493,110 last year.
The median price paid for an existing single-family home in California rose to $262,420, up 10.7% from $237,060 a year ago. Nationally, the median existing-home price climbed 6.3% to $144,700.
Times staff writer Diane Wedner in Los Angeles contributed to this report.
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Gross Domestic Product
Percentage change from previous quarter, annualized rate:
1st quarter 1001: +1.3%
Source: Commerce Department