U.S. economic growth has cooled — which likely means U.S. politics will now heat up:
U.S. economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a slower pace, but stronger demand for automobiles softened the blow.
Gross domestic product expanded at a 2.2 percent annual rate, the Commerce Department said on Friday in its advance estimate, moderating from the fourth quarter’s 3 percent rate.
While that was below economists’ expectations for a 2.5 percent pace, a surge in consumer spending took some of the sting from the report and growth was still stronger than analysts’ predictions early in the quarter for an expansion below 1.5 percent.
“There’s nothing catastrophic happening, this is just slow growth and this underscores that the economy is on sound footing but nothing more,” said Steven Baffico, chief executive at Four Wood Capital Partners in New York.
Futures for the broad-based S&P stock index pared gains after the GDP report, while U.S. Treasuries prices turned positive. The dollar extended losses against the yen and fell against the euro.
Although the details were mixed, the GDP report offered a somewhat better picture compared with the fourth quarter, when inventory building a
The U.S. economy expanded less than forecast in the first quarter as the biggest gain in consumer spending in more than a year failed to overcome a diminished contribution from business inventories.
Gross domestic product, the value of all goods and services produced in the U.S., rose at a 2.2 percent annual rate after a 3 percent pace, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 2.5 percent rise. Household purchases increased 2.9 percent, exceeding the most optimistic projection. Homebuilding grew the fastest in almost two years.
Consumer confidence this month unexpectedly rose to the highest level in a year, another report showed, signaling household spending may continue to propel sales at retailers like Target Corp. (TGT) and cushion the economy from cooling business investment and overseas trade. The GDP data confirm the view of Federal Reserve officials who this week said they expect “moderate” growth as they repeated borrowing costs are likely to stay low at least through late 2014.
“Consumers are remarkably stable and steady,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly estimated first-quarter GDP. “We’ll need to see final demand continue to improve. We’re still in muddling-along territory.”
“We’re just muddling along” we a terrific campaign slogan for Barack Obama. But it might be of interest to Republicans.
Joe Gandelman is a former fulltime journalist who freelanced in India, Spain, Bangladesh and Cypress writing for publications such as the Christian Science Monitor and Newsweek. He also did radio reports from Madrid for NPR’s All Things Considered. He has worked on two U.S. newspapers and quit the news biz in 1990 to go into entertainment. He also has written for The Week and several online publications, did a column for Cagle Cartoons Syndicate and has appeared on CNN.