26 April 2013 14:15 [Source: ICIS news]
WASHINGTON (ICIS)--The US economy grew at an annual pace of 2.5% in the first quarter, the Commerce Department said on Friday, marking a considerable improvement from the moribund 0.4% expansion seen in the fourth quarter last year.
In its first report on the nation’s economic performance in the first three months of 2013, the department said the annualised 2.5% gain in GDP was driven in large measure by a 3.2% jump in consumer spending – what the department calls personal consumption expenditures (PCE).
The strong first-quarter advance in consumer spending is in contrast to the more modest 1.8% growth in PCE seen in the final three months of 2012, and it suggests that consumers are feeling increasingly confident about their near-term economic futures.
That is important because consumer spending is the principal engine of the US economy, accounting for as much as 70% of all commercial activity and production.
The department said first-quarter growth also was spurred by gains in private inventory investments, home building and capital spending by businesses on plants and equipment.
The first quarter’s performance was held back a bit, said the report, by declines in federal and state government spending.
But even the growth areas of the economy, housing construction and manufacturing, did not do as well in the first quarter as they did in the fourth quarter 2012.
The report said, for example, that durable goods manufacturing grew by 8.1% in the first quarter, but that is down from the much stronger 13.6% gain seen in this category in the fourth quarter 2012.
And while housing construction grew by 12.6% in the first quarter, that key economic engine also has slowed from the 17.6% pace set in the final quarter of last year.
Non-residential fixed investment – spending by businesses on plants and equipment – grew by 2.1% in the first quarter compared with this segment’s much stronger 13.2% expansion in the fourth quarter 2012.
The report also said that federal government spending fell by 8.4% in the first quarter, along with a 1.2% drop in outlays by state-level governments.
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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