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Consumer spending softens economic slowdown
By Catholic Online (NEWS CONSORTIUM)
April 27th, 2012
Catholic Online (www.catholic.org)
April 27th, 2012
Catholic Online (www.catholic.org)
A rise in consumer spending has softened the blow of a slowing U.S.
economy in the first quarter of 2012. The Commerce Department reported
this week that gross domestic product expanded at an annual rate of 2.2
percent in the first three months of the year, down from a 3.0 percent
rate in the fourth quarter and below economists' expectations of a 2.5
percent pace.
A surge in consumer spending helped lessened the blow of this report, and growth was still stronger than analysts' predictions early in the quarter for an expansion below 1.5 percent.
The GDP report offered a somewhat better picture of growth compared with the fourth quarter, when inventory building accounted for nearly two thirds of the economy's growth. In the first quarter, demand from consumers took up the slack.
Consumer spending which accounts for about 70 percent of U.S. economic activity, increased at a 2.9 percent rate - the fastest pace since the fourth quarter of 2010. That compared to a 2.1 percent rise in the fourth quarter.
Another positive sign was home construction rising at its fastest pace since the second quarter of 2010, thanks to unusually warm winter.
On the other side of the coin, while the warm weather helped the economy by boosting home building and renovations, it undercut demand for utilities, spending at ski resorts and sales of winter apparel. As such, weather was probably not the biggest contributor to growth during the quarter.
However, business spending fell for the first time since the fourth quarter of 2009, with investment in equipment and software rising at its slowest pace since the recession ended. In addition, business spending fell at a 2.1 percent pace after rising 5.2 percent in the fourth quarter.
There was also the surge in car buying. Americans stepped up spending on automobiles in the first quarter, with motor vehicle sales rising by the most in four years, reflecting a demand after last year's earthquake and tsunami in Japan disrupted supplies and left showrooms short on popular models.
Many U.S. households have replaced older vehicles after tightening their belts during the 2007-09 recessions. Motor vehicle output contributed 1.12 percentage points to first-quarter GDP growth.
First-time applications for unemployment benefits have spiked in recent weeks, although many economists pin the rise on seasonal quirks.
Overall, consumer spending which accounts for about 70 percent of U.S. economic activity, increased at a 2.9 percent rate - the fastest pace since the fourth quarter of 2010. That compared to a 2.1 percent rise in the fourth quarter.
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