US economic growth slower than thought in first quarter

Ford engine plant, Michigan US economic growth was slower than thought in the first three months of the year

The US economy grew at an annualised 1.9% in the first three months of 2012, less than the 2.2% first thought.

The slower growth rate - which was in line with forecasts - followed a modest downward revision in consumer spending.

A rise in the growth in imports also accounted for the weaker outlook.

The second official estimate of gross domestic product (GDP) from the Commerce Department also showed that after-tax corporate profits fell for the first time in three years.

The department said that after-tax corporate profits fell by 4.1%, the biggest fall since the last three months of 2008.

The figures showed that consumer spending grew at 2.7% instead of the previously estimated 2.9%, while a drop in government spending from 3.9% to 3% also held back economic growth.

In addition, businesses restocked at a modest pace, reflecting weakening demand.

Retail boost

Estimates for the current April-to-June quarter show that analysts expect growth to pick up to an annualised pace of 2.5%, although that would still be below the 3% growth rate the Commerce Department said the US economy was growing at in the fourth quarter of last year.

Many economists expect US economic growth to continue at about 2.5% for the rest of the year, a better performance than the 1.7% growth recorded in 2011.

That picture was enhanced by news from US retailers, with many stores reporting stronger-than-expected sales in May.

Limited Brands, the parent company of underwear chain Victoria's Secret, the discount chain Target and clothing companies Gap and TJX Cos, which owns TJX and TJ Maxx, were among those reporting sales that beat analysts' forecasts.

Many analysts had feared that warmer-than-usual spring weather meant shoppers had brought forward clothing purchases which would mean fewer sales in May.

There was more good news from the Thomson Reuters Same Store Sales index, which was 3.9% higher in May, beating forecasts for a 3.6% rise.

However, the fragility of the US economy was highlighted by employment data, which showed private payroll growth rose only slightly in April, and the Labor Department said claims for jobless benefits were higher last week, suggesting a slowdown in the jobs market from its stronger showing earlier this year.

The most widely watched employment figures - the non-farm payrolls - will be released on Friday.

The first-quarter GDP figures are subject to at least one more revision, as more data comes in to the department for assessment.

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