US government's spending cuts curb growth

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The Independent Online

The US economy did not expand as fast as initially thought in the first three months of the year, a new report showed yesterday, as Washington-mandated belt-tightening hit government spending.

Revised figures from the Commerce Department showed that US GDP during the first three months of the year expanded at 2.4 per cent, against an initial estimate of 2.5 per cent.

The report showed government spending declined more than originally estimated over the period, easing by 4.9 per cent, compared with the first reading of 4.1 per cent. More encouragingly, however, consumer spending rose by 3.4 per cent.

A separate report, meanwhile, showed the number of Americans filing new claims for unemployment benefits rose by 10,000 to a seasonally adjusted rate of 354,000 in the week to 25 May. That was the third time the figures had climbed in four weeks, triggering some caution about the state of the US labour market.

The data is likely to be scrutinised closely by the US Federal Reserve as it considers when to begin tapering off its extraordinary stimulus measures. Currently, the Fed is buying $85bn (£56bn) worth of mortgage and government bonds every month to support the economy.