US 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, 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, it still marked three straight quarters of expansion as the US economy comes out of its most brutal downturn since the 1930s.
Analysts were little troubled by the report, which came as key consumption data implied a slowdown in the recovery and saw little threat of a double-dip recession.
“This does not signal a double-dip recession. What we are seeing is just a slowdown. Stimulus is burning off and consumer demand is not really robust,” said James Cox, managing partner at Harris Financial Group in Virginia.
A separate report showed US consumer sentiment in June at its highest level since January 2008, which should help to support spending. The Thomson Reuters/University of Michigan’s index on consumer sentiment rose to 76 from 73.6 in May, above economists forecasts for 75.5.
Stocks on Wall Street were trading flat to modestly higher, while the US dollar fell against the yen. Prices for US government bonds rose marginally.
The Federal Reserve this week struck a cautious note on the economy, and said the recovery was “proceeding”. The US central bank left overnight lending rates in a zero to 0.25 per cent range and renewed its commitment to an ultra-low interest rate policy.
GDP, which measures total output within US borders, has slowed from a 5.6 per cent pace in the fourth quarter, when much of the lift came from the government’s record $787 billion stimulus and the turn in the inventory cycle.
Growth in the January-March period was held back by business spending, which only rose at a 2.2 per cent rate instead of 3.1 per cent as reported last month.
Growth in software and equipment investment was also lowered to a 11.4 per cent rate from 12.7 per cent. Business spending rose at a 5.3 per cent pace in the fourth quarter.
Growth in consumer spending was trimmed to a 3 per cent rate. Although the rise was below the 3.5 per cent pace reported last month, it was still double the 1.6 per cent pace in the fourth quarter and the largest advance in three years. – (Reuters)
