us gdp economic growth
David McNew/Getty Images
By Lucia Mutikani

WASHINGTON -- U.S. economic growth regained speed in the first quarter, but not as much as expected, which could heighten fears the already weakening economy could struggle to handle deep government spending cuts and higher taxes.

Gross domestic product expanded at 2.5 percent annual rate, the Commerce Department said on Friday, after growth nearly stalled at 0.4 percent in the fourth quarter. The increase, however, missed economists' expectations for a 3.0 percent growth pace.

Part of the acceleration in activity reflected farmers' filling up silos after a drought last summer decimated crop output. Removing inventories, the growth rate was a tepid 1.5 percent.

Given the smaller-than-expected increase and signs the economy has weakened in recent weeks, the GDP data will probably weigh on U.S. stocks. It could also give ammunition for the Federal Reserve to maintain its monetary stimulus.

The U.S. central bank, which meets next week, is widely expected to keep purchasing bonds at a pace of $85 billion a month.

Data ranging from employment to retail sales and manufacturing weakened substantially in March after robust gains in the first two months of the year. There are indications the weakness persisted into April.

Broad-Based Gains

The GDP report showed contributions to growth from all areas of the economy, with the exception of government, trade and investment by businesses in offices and other commercial buildings.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 3.2 percent pace -- the fastest since the fourth quarter of 2010. It grew at a 1.8 percent rate in the fourth quarter of last year.

However, households cut back on saving to fund their purchases after incomes dropped at a 5.3 percent rate in the first quarter -- a bad sign for future spending growth. The drop in income was the largest since the third quarter of 2009.

The saving rate -- the percentage of disposable income households are socking away -- fell to 2.6 percent, the lowest since the fourth quarter of 2007, from 4.7 percent in the fourth quarter of 2012.

Much of the gains in first-quarter spending came from automobile purchases and outlays for utilities, which were boosted by unusually cold temperatures. Consumers managed to step up their spending despite the return of a 2 percent payroll tax and higher gasoline prices.

Despite the spike in gasoline prices, inflation pressures were benign in the first three months of the year.

An inflation gauge in the government's GDP report rose at a 0.9 percent rate, the smallest increase since the second quarter of 2012. The personal consumption expenditure index had increased at a 1.6 percent pace the fourth quarter.


A core measure that strips out food and energy costs rose at a 1.2 percent rate, still well below the Fed's 2 percent target. Core PCE had increased at a 1.0 percent rate in the fourth quarter.

The lack of inflation should come as welcome relief for American households, but it could cause some nervousness at the U.S. central bank, which may see it as a symptom of the economy's weakness.

Another big contributor to growth in the fourth quarter was inventory accumulation, which added a full percentage point to GDP growth after chopping off 1.5 points from output in the final three months of last year.

Business spending on equipment and software slowed sharply, growing at an only 3.0 percent rate after a brisk 11.8 percent pace in the fourth quarter.

Economists caution that it is too early to blame the cooling in business investment and other more recent signs of economic softness on the $85 billion in mandatory government spending cuts, known as the sequester, that began on March 1.

Homebuilding marked an eighth straight quarter of growth, though the pace moderated from the fourth quarter. Housing added to growth last year for the first time since 2005 and its recovery should help ensure the economy doesn't contract.

While export growth rebounded, it was outpaced by imports, resulting in a trade deficit that cut off half a percentage point from output.


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basscat58

Hey Consumers spent because they had too! As long as this disfunctional Socialist with a Tood is in the White House grab your money clip@! For all you Left Wing Turkey's you are Slow Learners take the Short Bus!

April 26 2013 at 10:23 PM Report abuse rate up rate down Reply
obamaisafiasco

I see the nimble minded Obamabot has a new screen name and continues to post and show his stupidity

April 26 2013 at 5:57 PM Report abuse rate up rate down Reply
bchrist751

We keep living the Obama economic nightmare. and this fall Obama care kicks in. Oh happy days...

April 26 2013 at 1:14 PM Report abuse +5 rate up rate down Reply
mrspelosi

Pukey darling you must be geting all excited that May 1st is just around the corner and your welfare check will be in the mail.

April 26 2013 at 1:02 PM Report abuse +3 rate up rate down Reply
mrspelosi

repukeins
LMFAO!!!!!!!!........5 YEARS LATER AND NO SIGN OF IMPEACHMENT.

GET A LIFE REDNECKHILLBILLY

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Oh my such a bigoted comment. You might want to ask one of the caretakers at the asylum to
enroll you in some behavioral counseling dear.

April 26 2013 at 12:58 PM Report abuse +3 rate up rate down Reply
ybob555

After reading some of these posts that do nothing but call names & bicker back & forth with other posters, it's a shame you just can't come up with any constructive criticism or suggestions as to how to solve problems other than bit*h about them.
Lying by Presidents & their administrations are as old as time, & it will never change. Distorted figures & reports too will always be put forth, to make themselves look good. Figures & reports can be manipulated in so many ways it's hard to keep count of them.
The fact is he has some bad policies ( most of them) & surrounded himself with a bunch of questionable advisers. My person opinion is, he really didn't want to be President for a second term, didn't want to be President in his first term either, since he gave most of the power to Nancy & Harry, & has his retirement set.

April 26 2013 at 12:57 PM Report abuse -3 rate up rate down Reply
mrspelosi

repukeins
Sorry Repukeins, more will be fired in the 2014 mid-term elections.

______________________________________________________

The caretakers must be serving cocktails at the asylum now. You must be quite intoxicated if you think that will happen darling.

April 26 2013 at 12:56 PM Report abuse +1 rate up rate down Reply
mrspelosi

repukeins
YOU HAVE SO MUCH BS COMING OUT OF YOUR MOUTH NO WONDER YOU ONLY HAVE ONE TOOTH LEFT.

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Darling it is better to have on tooth then none at all like yourself dear.

April 26 2013 at 12:54 PM Report abuse +3 rate up rate down Reply
1 reply to mrspelosi's comment
mrspelosi

*one tooth

April 26 2013 at 1:40 PM Report abuse +2 rate up rate down Reply
mrspelosi

repukeins
GOP = GOOFY ODD PEOPLE

_____________________________________

Darling do the caretakers usually allow you to be on the internet at this time of day at the asylum?

April 26 2013 at 12:53 PM Report abuse +3 rate up rate down Reply
1 reply to mrspelosi's comment
dthomp1313

what is the matter mrspelosi? Welfare check late? Obamaphone not working? The Real Slut Wives of New York not on? I know these things really do upset the society parasites

April 26 2013 at 1:33 PM Report abuse -1 rate up rate down Reply
1 reply to dthomp1313's comment
mrspelosi

Oh my such foul language. Perhaps some behavioral counseling might be in order for you dear. You appear to be out of control. How unfortunate for you darling.

April 26 2013 at 1:41 PM Report abuse +3 rate up rate down
apartyof.omg.nojobs

WONT BE LONG BEFORE O~BOIMB~US ILLEGAL IMMIGRANTS THAT HE LET "BREAK" INTO AMERICA BOMB N KILL N MAIM OUR AMERICAN CITIZENS AGAIN. ! STAY AWAY FROM CROWED PLACES UNTILL THIS MUSLIM CLOWN IS REMOVED FROM OUR WHITE HOUSE IN HANDCUFFS. ! YOUR NOT SAFE ANYMORE WITH HIS ILLEGAL IMMIGRANT TERRORISTS RUNNING AROUND OUR COUNTRY. !

April 26 2013 at 12:35 PM Report abuse rate up rate down Reply