WASHINGTON: United States economic growth was slower than previously reported in the first quarter as estimates of business and consumer spending were cut.
In its final estimate on the first quarter yesterday, the Commerce Department said gross domestic product (GDP) expanded at a 2.7 per cent annual rate instead of the 3 per cent pace it reported last month.
Although the growth pace was below market expectations of a 3 per cent rate, it still marked three straight quarters of expansion as the economy digs out of its most brutal downturn since the 1930s.
However, recent data has suggested that the recovery lost some momentum in the second quarter, with persistently high unemployment restraining consumer spending, and home building and purchases faltering.
'You are getting growth in fits and starts... We are not generating real income growth that we like. It's a recovery that has a real weight on its back,' said Mr Paul Ballew, chief economist at Nationwide in Columbus, Ohio.
The Federal Reserve this week struck a cautious note on the economy and said the recovery was 'proceeding'. The economy is, however, not expected to fall back into recession.
GDP, which measures total goods and services output within US borders, grew at a 5.6 per cent pace in the fourth quarter.
Growth in the January to March period was held back by business spending, which rose at a 2.2 per cent rate only, instead of 3.1 per cent as reported last month.
Another drag on growth came from exports whose growth was eclipsed by a rise in imports, resulting in a trade deficit that subtracted from GDP.
State and local governments also weighed, with their spending falling at the sharpest pace since the second quarter of 1981.
Growth in consumer spending was also revised down to a 3 per cent rate. Although the rise was below the 3.5 per cent pace reported last month, it was still more than double the 1.6 per cent pace in the fourth quarter and the largest advance in three years.
Consumer spending, which normally accounts for more than two-thirds of US economic activity, added 2.13 percentage points to GDP last quarter, also the largest contribution since the first quarter of 2007.
However, real final sales to domestic purchasers, considered a better measure of domestic demand, rose at a 1.6 per cent rate instead of the 2 per cent pace reported last month.
Source: Straits Times, 26 Jun 2010