The US economy grew more slowly in the first three months of this year. Governments spent less, and businesses cut back on investment. But consumers spent at the fastest pace in more than a year. The result suggests that the economy will continue to expand, slowly but steadily.
The Commerce Department said on Friday that the economy grew at an annual rate of 2.2 per cent in the January-March quarter, compared with a 3 per cent gain in the final quarter of 2011. In 2011, the economy expanded just 1.7 per cent. But growth is expected to rebound to around 3 per cent for all of 2012 as stronger job growth spurs more consumer spending.
The economy is by far the biggest issue in this year’s presidential campaign, with Republican challenger Mitt Romney hammering at President Barack Obama’s record at handling the slow recovery.
Consumer spending accelerated to an annual rate of 2.9 per cent in the first quarter. The strength came from a second robust quarter of growth in auto purchases. Consumer spending is closely watched since it accounts for 70 per cent of economic activity.
All levels of government are under pressure as they struggle to control budget deficits. Government spending fell at an annual rate of 3 per cent in the first quarter.
And investment in equipment and software rose at just a 1.7 per cent annual rate. That was the slowest pace since the Great Recession ended in mid-2009.
The 2.2 per cent overall increase in the economy in the first quarter marked the 11th consecutive quarter that the gross domestic product has expanded since the deep 2007-2009 recession ended in June 2009. But the gains have been far below the usual increases coming out of a deep recession.
GDP is the nation’s total output of goods and services, from cars and refrigerators to electricity to manicures.
Trade was a slight drag on growth in the first three months of the year. US manufacturers are finding it harder to sell products overseas because of Europe’s debt crisis and weaker growth in Asia.
Many economists predict growth will strengthen in the second half of this year because they think hiring will continue to improve. Job growth has helped drive the unemployment rate to 8.2 per cent in March from 9.1 per cent in August and given households more money to spend.
Last year began with signs of healthier growth. But then the economy endured a series of shocks. Gasoline prices surged after political unrest triggered by the Arab Spring.