U.S. economy grew 2.4 percent in first quarter
WASHINGTON — The U.S. economy grew at a modest 2.4 percent annual rate from January through March, slightly slower than initially estimated. Consumer spending was stronger than first thought, but businesses restocked more slowly and state and local government spending cuts were deeper.
The Commerce Department said Thursday that economic growth in the first quarter was only marginally below the 2.5 percent annual rate the government had estimated last month. That's still much faster than the 0.4 percent growth during the October-December quarter.
Most economists think growth is slowing to around a 2 percent annual rate in the April-June quarter as the economy adjusts to federal spending cuts, higher taxes and further global weakness. Still, many say the decline may not be as severe as once thought. That's because solid hiring, surging home prices and record stock gains should keep consumers spending.
Jennifer Lee, senior economist at BMO Capital Markets, said the small revision to first-quarter growth supported her view that the economy will grow a moderate 2.2 percent for the year, the same as last year.
Still, Lee expects growth to improve to 3.2 percent in 2014, as the job market accelerates and consumers grow more confident in the economy.
Consumer spending accounts for 70 percent of economic activity as measured by the gross domestic product. GDP is the economy's total output of goods and services, from haircuts and computers to trucks and aircraft carriers.
The government's second look at first-quarter growth showed that consumer spending roared ahead at a 3.4 percent annual rate. That's the fastest spending growth in more than two years and even stronger than the 3.2 percent rate estimated last month.
Healthy consumer spending shows many Americans are shrugging off an increase this year in Social Security taxes that has reduced most paychecks.
And more consumer demand could also prompt businesses to restock at a faster rate later this year. Business inventories grew in the first quarter but at a slightly slower pace than first estimated. That was a key reason for the small revision.
A big reason that consumers have been able to withstand the higher taxes is the job market has improved. Employers have added an average of 208,000 jobs a month since November. That's well above the monthly average of 138,000 during the previous six months.
Surging stock prices and steady home-price increases have also allowed Americans to regain the $16 trillion in wealth they lost to the Great Recession. Higher wealth tends to embolden people to spend more. Some economists have said the increase in home prices alone could boost consumer spending enough to offset a Social Security tax increase.
The weakest area of the economy continues to be government spending, which fell for the 10th time in the last 11 quarters. The 4.9 percent rate of decline was even larger than first estimated, reflecting further drops in defense spending and weaker activity at the state and local level.
And with the federal government furloughing workers and trimming other spending to meet the mandates of the sequester, government activity will be a drag on growth for the rest of the year.
The housing recovery continued to add to growth at the start of the year. Home construction, one of the economy's top performers, grew at an annual rate of 12.1 percent in the first quarter, its third consecutive quarter of double-digit growth.
Businesses, however, reduced the pace of their investment in equipment and computer software. That slowed to a growth rate of 4.6 percent in the first quarter, down from growth of 11.8 percent in the fourth quarter.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Cops: Washington County surplus store sold stolen items
- Flyers continue mastery of Penguins at Consol
- Starkey: Century mark beckons for Ben
- Steelers’ defense on pace for fewest sacks in 16-game season
- Highmark seeks double-digit increase for more benefits, heavy use
- Officials identify witness to Port Authority bus crash after releasing photo
- WPIAL, coaches are still looking to schedule Week 9 rivalry games
- Canadians more fearful, aware after ‘very rare’ attack in Ottawa
- Buffalo Township grandma pleads guilty to selling hundreds of pounds of weed
- Contempt citation sought by state against Highmark for alleged violation of deal with UPMC
- Wanted sex offender caught hiding in homemade fort in Washington County