US economy expanded by lower-than-expected 2.5% in first three months of year
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Friday 26 April 2013
The American economy expanded at a rate of 2.5 per cent in the first three months of the year, according to new figures released today, performing far better than at the end of 2012 but missing expectations as falling government spending proved a drag on growth.
Underpinning the expansion, which was less than the 3 per cent rate predicted by economists, was a rise in consumer spending. It climbed by 3.2 per cent over the first quarter, the best pace since the end of 2010. However, the rise came as consumers compensated for falling household incomes by putting less money away for savings - something that bodes ill for future spending.
The squeeze on government spending, meanwhile, was all too obvious. It sank by 4.1 per cent. Political disagreement in Washington means that the US economy must absorbed $85bn in government spending cuts this year, another factor that is likely to dim growth prospects in coming months.
The overall result is that while the first quarter GDP report was better than the one for the final three months of 2012, when the US economy expanded by just 0.4 per cent, the underlying figures gave ample grounds for caution. For policymakers at the US Federal Reserve, the figures are likely to reinforce the view that while the economic backdrop is much improved since the dark days of the credit crunch, it remains challenging, warranting a continuation of the central bank's stimulus measures. The Fed is currently buying up around $85bn of government and mortgage-related bonds every month to support the recovery.
- 1 Michael Brown shooting: Amnesty International sends team within US for first time as National Guard deployed
- 2 Greggs Google fail: bakery falls afoul of search engine's algorithms with 'unofficial' logo
- 3 Is this the end of apps? New research says a third of us don't bother to download
Isis threat: Cameron wants an alliance with Iran
Crisis? What crisis? A visiting US doctor gives the NHS a rave review
Ukip MEP calls for reintroduction of death penalty on fiftieth anniversary of last deaths
Russell Brand calls for Israel boycott: Comedian urges big businesses that 'facilitate the oppression of people in Gaza' to pull funding
Michael Brown shooting: Chaos erupts on the streets of Ferguson after autopsy shows teenager was shot six times – twice in the head
World peace? These are the only 11 countries in the world that are actually free from conflict
£30000 - £33000 per annum + Benefits + Bonus: Harrington Starr: Junior DBA (SQ...
£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...
£60000 - £90000 per annum + Bonus: Harrington Starr: Global leading Energy Tra...
£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...