But at this point the economy isn't sinking either, and it should see some kind of benefit from the recent efforts of the Federal Reserve to cut interest rates. That's a positive because it should translate into the need for more production from companies. Economists believe equipment and software spending, owing to the glut of capacity companies already have available to them, is likely to drag on the economy for a few more quarters. These are being watched closely since so many big-name tech companies have complained of excess goods in their warehouses. Some companies have been successful reducing inventories.
Companies are more likely to increase production the faster they can work down their inventories.
Because the report was stronger than anticipated, stock futures rose after its release. Higher interest rates, declining business demand for equipment and software and falling equities ate into economic growth in the last several months. The Federal Reserve started a series of interest rate cuts at the beginning of the year to put life back into the economy. The figure, the strongest reading since the first quarter of 2000, shows inflation isn't dead, despite the decline in economic growth. Read our conflicts and disclosure policy .