A woman who is filled with a gas station in Los Angeles, April 11, 2011.
Credit: Reuters/Fred ProuserBy Lucia MutikaniWASHINGTON | Wed Apr 28, 2010 12: 37 pm EDT
WASHINGTON (Reuters)-growth braked sharply in the first quarter, as higher prices for food and gasoline sluggish consumer spending and sent inflation increased at a faster pace of 2-1/2 years.
Another report Thursday showed a surprising jump in the number of Americans claiming unemployment benefits last week, which could cast a shadow on expectations for a substantial increase in output in the second quarter.
Gross domestic product growth slowed to an annual rate of 1.8 percent from fourth quarter rate of 3.1 percent, the Commerce Department said. Economists had expected a 2 percent rate.
With most of the pull back due to sharp cuts in defence spending and harsh winter weather, analysts were hopeful the economy will regain speed in the second quarter. The reduction of defence spending was seen as temporary.
"Growth was disappointing, given the dynamics of the economy class in the year. We are still convinced that the economy will improve outside the soft patch via this quarter in the second half of the year, "said Brian Levitt, an economist at OppenheimerFunds in New York.
Economists were encouraged that details about the report, with specific consumer spending and business spending on software and equipment, was not as weak as had been feared, and that this said proposed an institution to support growth in place.
Consumer spending accounts for about 70 percent of US economic activity.
WEAKNESS OF LABOR A GRICULTURAL MARKET SITUATION?
While 25,000 increase in requirements for State unemployment benefits last week, a Slovak pale a weakening of the labour market, analysts cautioned against reading too much into profit. They said severe weather in some parts of the country, and could distort the shape of Easter holidays.
Still, the data suggested improvements in the labour market still only come reluctantly for the coins.
"The underlying downtrend in initial claims that had been implemented, since it has flattened the end of last year," Omair Sharif, said an economist at RBS in Stamford, Connecticut. But he added: "it seems a little too early to suggest that the underlying pace of layoffs has picked up".
Hiring accelerated in March and a report next week is expected to show job creation remained relatively strong in April.
MODERATE PACE
Prices of u.s. government debt increased after the data, while stocks with lower limbs. The weak GDP report and of the stated commitment to a loose monetary policy stance, after a two-day meeting on Wednesday kept the dollar near three-year low against a basket of currencies.
The Fed on Wednesday trimmed its growth estimate for 2011 be between 3.1 and 3.3 percent by a 3.9 percent 3,4 January projection.
Some economists felt estimates for the US Central Bank may be somewhat optimistic, given the poor start to the year, even though most agreed would strengthen the development soon.
Optimism in the economy will get a more solid basis for the second quarter was in a report that shows pending sales of previously owned homes rose by 5.1 percent in March. Housing struggles to recover and is one of the wind facing the economy.
Growth in the first quarter fell by a sharp pull back on consumer spending, which was expanded by a factor of 2.7 percent, after a sharp rise of 4 percent in the fourth quarter.
Increasing commodity prices mean consumers have less money for other items. Gasoline prices remain a concern, although it is expected to stabilise somewhat.
THE PLITHWRISMOS INCREASED
The GDP report underscores the pain causing strong food and gasoline prices to households.
A counter inflation contained in the report have increased at a rate of 3.8 percent--the fastest pace since the third quarter of 2008--after increasing 1.7% in the fourth quarter.
A range of core, which excludes the cost of food and energy, a factor of 1.5 percent--the fastest since the fourth quarter of 2009--has increased by 0.4% in the fourth quarter. The core structure is closely monitored by Federal Reserve officials, who would like to see closer to 2 percent.
During the first quarter, enrichment companies picked up, with inventories growing 43.8 billion dollars after an increase of $ 16.2 billion in the fourth quarter. But the buildup was less than some economists had expected and said forward for further skills inventory, to strengthen the development of the second quarter.
Inventories added 0.58 percentage points of GDP growth in Q1. Apart from the stocks, the economy grew by 0.8 percent pace after pedestrians are 6,7% in the fourth quarter.
Business spending on equipment and software acquired pace, but public spending suffered the deepest contraction in the fourth quarter of 1983.
Original building did, while investment in nonresidential structures slowed the pace of the fourth quarter of 2009, possibly the result of bad weather.
(Additional reporting by Mark Felsenthal. Edit by Neil Stempleman)
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