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The United States Economy United States Economy Continues to Surge The U.S. economy soared in the second quarter of 2000, growing 5.2 percent over the same period the previous year. The continued growth surprised economists, who had predicted growth of just 3.8 percent for the quarter. During the first quarter of the year the economy grew 4.8 over the same period in 1999. "Rumors of a slowdown seem to be greatly exaggerated," said David Wyss, chief economist for Standard & Poor's. "You just can't keep a good economy down." The growth of the economy means that the United States enters its ninth consecutive year of expansion-the longest in its history. Output over the past nine years has grown dramatically, with the economy expanding at an average rate of 4.5 percent a year since 1996. Consumer Spending Slow, but Business Investment Soars The rate of growth of consumer spending fell to just 3 percent in the second quarter, down from 7.6 percent in the first quarter. Investment by business remained very strong, however, increasing 21 percent in the first quarter and 19.1 percent in the second quarter. "Consumption has cooled without weakening the economy," said Richard B. Hoey, chief economist at the Dreyfus Corp. Federal Reserve Tries to Slow Rate of Growth The economy continued to grow in 2000, despite attempts by the Federal Reserve Board to slow the rate of growth in order to prevent inflation. To prevent "overheating," the Fed raised short-term interest rates six times since June 1999. The rate hikes increased the rate banks charge for loans, making it more expensive for businesses and consumers to borrow. Continued rapid growth has made additional rate hikes likely. Trade Deficit Reaches Near-Record Level The United States trade deficit-the difference between U.S. exports and U.S. imports-rose to $31 billion in May, the second-largest deficit ever. The increase reflects the fact that the booming U.S. economy is allowing Americans to buy more imported goods than ever, while sluggish performance elsewhere in the world is hurting sales of U.S. goods abroad. The increase in oil prices also hurt the trade balance.
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