This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.

You can find the current article at its original source at http://www.guardian.co.uk/business/2013/apr/26/us-economy-growth-gdp-forecasts

The article has changed 3 times. There is an RSS feed of changes available.

Version 0 Version 1
US economic growth quickens but misses forecasts as cuts kick in US economic growth quickens but misses forecasts as cuts kick in
(about 3 hours later)
The US economic recovery gathered pace in the first quarter but fell short of expectations as government cuts countered a sharp rise in consumer spending.The US economic recovery gathered pace in the first quarter but fell short of expectations as government cuts countered a sharp rise in consumer spending.
The nation's gross domestic product (GDP) rose at a 2.5% annual rate between January and March, the Commerce Department said Friday. Economists had been forecasting growth of 3% and stock market futures, an indication of investor sentiment, began falling ahead of the start of the trading day. The nation's gross domestic product (GDP) rose at a 2.5% annual rate between January and March, the Commerce Department said Friday. Economists had been forecasting growth of 3%.
The latest figure marks the 15 consecutive quarter of growth and is substantially higher than the 0.4% GDP growth in the final quarter of 2012. But they come as widespread budget cuts – known as sequestration – come into effect. The average pace of growth is just above 2% annually, weak by historical standards. The numbers come after a disappointing news from the employment market, which added just 88,000 new jobs in March. The latest figure marks 15 consecutive quarters of growth and is substantially higher than the 0.4% GDP growth in the final quarter of 2012. But they come as widespread budget cuts – known as sequestration – come into effect. The average pace of growth is just above 2% annually, weak by historical standards. The numbers come after a disappointing news from the jobs market, which added just 88,000 new positions in March.
Consumer spending was the biggest driver of growth in the first quarter. Personal consumption expenditures grew 3.2%, the best pace since the end of 2010. Sales of durable goods – including cars and household appliances – rose 8.1%.Consumer spending was the biggest driver of growth in the first quarter. Personal consumption expenditures grew 3.2%, the best pace since the end of 2010. Sales of durable goods – including cars and household appliances – rose 8.1%.
Government cuts continued to hold back GDP. Federal government spending and investment dropped 8.4% in the quarter, following a 14.8% fall in the last quarter of 2012. National defense decreased 11.5%, compared with a decrease of 22.1% at the end of last year.Government cuts continued to hold back GDP. Federal government spending and investment dropped 8.4% in the quarter, following a 14.8% fall in the last quarter of 2012. National defense decreased 11.5%, compared with a decrease of 22.1% at the end of last year.
Dan Greenhaus, the chief strategist at BTIG, said the government cuts represent the worst back-to-back drop in Federal spending since 1954.
"Government spending has now been a drag on growth in 11 of the last 13 quarters," he said. "Say what you will about government spending but its reduction, as we've seen, is a drag on growth – at least as computed in this manner."
Paul Ashworth, the chief US economist at Capital Economics, said the growth rate was still "impressive" given the "almost unprecedented fiscal squeeze" the US economy had suffered.Paul Ashworth, the chief US economist at Capital Economics, said the growth rate was still "impressive" given the "almost unprecedented fiscal squeeze" the US economy had suffered.
"The decline in government spending over the past two quarters is the biggest six-month contraction since the Korean war ended. Despite the decline in incomes, consumption growth accelerated to 3.2%, from 1.8%, although that means the saving rate fell to 2.6%, from 4.7%."The decline in government spending over the past two quarters is the biggest six-month contraction since the Korean war ended. Despite the decline in incomes, consumption growth accelerated to 3.2%, from 1.8%, although that means the saving rate fell to 2.6%, from 4.7%.
"Business investment increased by a modest 2.1%, after a massive 13.2% annualised gain in the final quarter of last year. The housing recovery generated a 12.6% jump in residential investment, which was the third consecutive double-digit quarterly gain," he wrote in a note to clients."Business investment increased by a modest 2.1%, after a massive 13.2% annualised gain in the final quarter of last year. The housing recovery generated a 12.6% jump in residential investment, which was the third consecutive double-digit quarterly gain," he wrote in a note to clients.
Ashworth warned that the next quarter too could be low growth. "With the sequestration spending cuts beginning to bite, we could see yet another contraction in government spending. We have 2.0% pencilled in, with growth accelerating modestly in the second half of the year as the fiscal squeeze begins to fade," he wrote. Ashworth warned that the next quarter, too, could see low growth. "With the sequestration spending cuts beginning to bite, we could see yet another contraction in government spending. We have 2.0% pencilled in, with growth accelerating modestly in the second half of the year as the fiscal squeeze begins to fade," wrote Ashworth.
The next test of the US recovery will come next Friday with the release of April's job tally.The next test of the US recovery will come next Friday with the release of April's job tally.