26 June 2013 15:50 [Source: ICIS news]
WASHINGTON (ICIS)--The US economy did not perform as well in the first quarter this year as originally estimated, the Commerce Department said on Wednesday, with Q1 GDP annualised growth now lowered to 1.8% from the first estimate of 2.5%.
In its first estimate of Q1 GDP growth, issued in late April, the department said that its measure of consumer spending was too high.
The third and final appraisal of the economy's Q1 performance, issued on Wednesday, said that both consumer spending and export trade were lower than initially believed.
The GDP estimate released on Wednesday is based on more complete source data than were available for the second estimate issued last month, the department said. In that second estimate, issued in late May, the Q1 GDP growth had been narrowly revised downward to 2.4% from the April measure of 2.5%.
The department said that in addition to consumer spending, the first quarter saw positive contributions from private inventory investment and housing construction, but those gains were partly offset by declines in government spending at the federal, state and local levels along with lower export trade.
The revised growth level for consumer spending in the first quarter may be worrisome to policymakers.
Initially the department said that Q1 consumer spending grew by 3.2%, but that pace has now been lowered to 2.6%.
Consumer spending is critical to the US economy because it accounts for as much as 70% of all commercial activity and production.
While the revised estimate for consumer spending growth in the first quarter was only 2.6%, that was better than the 1.8% pace recorded for the fourth quarter of 2012.
Despite the downward revision in first quarter GDP, the economy was performing much better in the first three months of this year, compared with the moribund 0.4% GDP growth seen in the last quarter of 2012.
Some economists see a silver lining in the downgrade of Q1 GDP growth, suggesting that the slower rate of growth - especially in consumer spending - may cause policymakers at the Federal Reserve Board to think again about rolling back their longstanding economic stimulus measures.
The Fed caused turmoil in financial markets last week when it said it might begin reducing its monthly $85bn (€65bn) purchases of mortgage-backed securities and long-term Treasury bonds.
($1 = €0.76)
Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
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