Against this backdrop, economists said the Federal Reserve, which has slashed rates three times since January by a total of 1.5 percentage points, will need to cut rates several times more to keep the foundering economy afloat. A drop in spending on big-ticket items by businesses and consumers accounted for most of the weakness. It was the worst showing since a 0.8 percent growth rate in the second quarter of 1995. On Wall Street, stocks seesawed throughout the day as doubts about earnings and the economy lingered. The Dow Jones industrial average closed up 13.71 points at 9,799.06.
Some analysts believe output actually shrank in the first quarter.
Paul Kasriel, chief economist at the Northern Trust Co., who is in that camp, estimates GDP declined by 0.3 percent in the current January-March quarter. Other economists, however, believe the economy in the first quarter is either growing at a slow pace of around a 0.8 percent rate or about the same pace posted in the fourth quarter. Treasury Secretary Paul O'Neill said in early February that he thought the nation's economy might be stalled. He said in an ABC interview last Sunday that the economy probably remained in positive territory in the just-ending first quarter, with a growth rate of between 0.25 percent and 0.75 percent. Even with the wide range of opinions on how the current quarter ultimately will fare, economists are hopeful that the record expansion was able to reach its 10th birthday this month and the country will escape the current slowdown without dipping into a recession.