By James Quinn, Wall Street Correspondent
Last Updated: 7:17pm BST 30/04/2008
The Federal Reserve has cut interest rates further as central bank chief Ben Bernanke attempts to head off a serious recession in the American economy. The Fed's Open Market Committee, the interest rate decision-making body of the central bank, cut rates by a quarter percentage to 2pc. It has brought rates down aggressively, from 5.25pc in September.
Mr Bernanke has so far used monetary policy to try and steer the US economy through what the majority of economists now agree is a housing market-led recession.However certain indicators are now beginning to suggest that the economy - though slow - may not be in recession after all. Today's latest gross domestic product figures for the first quarter show the US economy grew at 0.6pc from January to March, the same pace as the last quarter of 2007.
On that basis, the US is not in recession, given the classic definition is for two consecutive quarters of negative GDP growth.Other positive news came from a non-government survey of employment, which suggested that private sector employers added 10,000 jobs in April. The Dow Jones Industrial Average traded 90 points higher at 12,922 on the back of the seemingly good news.
Marc Pado, Cantor Fitzgerald's US market strategist, said: "The key here is that a pull-back is more shallow than expected."However, the overall GDP figure did mask some underlying points of concern, not least the fact that consumer spending in the first quarter rose just 1pc, its weakest increase since the second quarter of 2001.
Concern over the slowdown in the consumer economy is perhaps the biggest noose around the neck of the FOMC, pushed on by continual gloomy data from the housing sector as prices continue to fall and the amount of unsold homes continues to grow.
In addition, the boost to GDP came from an increase in company's inventories - or stocks - meaning that although production was strong in the first quarter, the economy could be hit later in the year if those inventories cannot be shifted.
In the industrial sector, the latest Chicago PMI report showed manufacturing had failed to grow for its third consecutive month in April, with manufacturing activity index edging up to 48.3 from 48.2 in March.Although this figure beat analysts' expectations - who had been looking for a slight decline to 48.0 - the fact that the index is still registering scores below 50 indicates a contraction in the sector.