The major drag on the economy was a rather large 13.6% reduction in business spending on new plants and equipment. This was the largest cutback since 1982, when the U.S. was suffering through a major recession. The housing sector continued to be quite strong. Residential construction increased by a rate of 7.4%.

The Bush administration believes that its tax cut and the Federal Reserve’s cumulative rate cuts will have a positive effect on economic growth in the second half of the year.