Acting aggressively to spur the U.S. economy, the Federal Reserve on January 30 reduced the federal funds rate (the rate at which banks borrow from one another) a half point from 3.5% to 3%. The cut followed a .75% cut on January 22, the largest one-day reduction in more than two decades.
The most recent Fed cut came on the same day the Commerce Department announced that the nation’s gross domestic product or GDP grew at an annual rate of 0.6% in the last quarter of 2007, while it expanded 2.2% over the whole year, the slowest pace in five years.
The economy didn’t get much help from consumers whose spending edged up just 0.2% in December, the weakest performance in six months, the Commerce Department said January 31.
Nor was December good for construction spending, which dropped 1.1%, the most in 15 months and twice as much as economists had been expecting, the Commerce Department said February 1.
Employment also showed weakness as U.S. employers cut 17,000 non-farm jobs in January, the first time since August 2003 that U.S. payrolls shrank, the Labor Department reported February 1. Analysts had forecast a gain of 80,000 jobs.
There were some economic bright spots. The Institute for Supply Management’s manufacturing index reentered positive territory with a reading of 50.7 in January, up from 48.4 in December. A reading above 50 indicates growth. Orders for durable goods, big-ticket items expected to last three or more years, also posted a larger-than-expected gain of 5.2% in December, the Commerce Department said January 29.
This week look for updates on factory orders on February 4.
Economic data compiled from government reports and news services msnbc.com, cnbc.com, cnn.money.com and Yahoo Economic Calendar.