Two other reports released Friday provided fresh evidence of the weak state of the economy at the start of the second quarter. Orders to U.S. factories for costly manufactured goods expected to last at least three years, such as cars, plunged in April by 5 percent, the largest drop since January. Demand fell sharply for transportation equipment, computers, and semiconductors. Sales of previously occupied homes fell last month by 4.2 percent. It was the second decline this year but still left sales at a rate of 5.2 million, close to a record high, the National Association of Realtors said.
Consumers remain the wild card.
Flagging demand has created a pileup of unsold goods, which businesses are feverishly trying to whittle down. That effort subtracted 2.96 percentage points from growth in the first quarter. While paring inventory reduces economic growth, economists said the excess must be cleared before companies can begin revving up production. Greenspan said in his Thursday night speech that he doesn't know how long that process will take. Consumer spending also was revised down to a lackluster annual rate of 2.9 percent in the first quarter, far below the 7.6 percent rate during the same period a year ago.