Economy picks up in 1st quarter but far less than expected
Will we ever see 3% growth again?
The American economy sped up in the first quarter of this year, with output expanding at an annual pace of 2.5 percent, according to a Commerce Department report released Friday. The number was lower than the 3 percent forecasters had been expecting.
While faster growth of any kind is welcome, much of the acceleration in gross domestic product was probably a result of unusually slow growth at the end of 2012, when the economy grew at an annual pace of just 0.4 percent. Growth in the fourth quarter had been dragged down by reduced restocking of businesses' inventories, for example, and in the first quarter businesses made up for this by adding much more to their shelves.
Consumer spending was up too, despite fears that the lapse of the temporary payroll tax holiday at the start of the year would hold back how much consumers were willing to spend. It's unclear whether consumers will continue to spend as freely in the months ahead, once they start to feel the pinch of this effective tax hike, particularly if wages continue to stagnate.
Exports, residential investment (housing, essentially) and business spending on equipment and software also rose.
Economists have expressed concern that the pace of growth may have started out strong in 2013 but slowed by the end of the first quarter, given recent disappointing reports about economic indicators in March. Employment slowed dramatically in March, for example, and orders for durable goods like aircrafts fell more than analysts had expected.
Additionally, across-the-board federal spending cuts, enacted as part of Congress's so-called sequester, are likely to weigh on growth going forward. In the first quarter of this year, government spending fell at an annual rate of 8.4 percent, after a decrease of 14.8 percent in the fourth quarter of 2012.
Recent news about factory output and durable goods has been awful. Consumer confidence is down, and while housing is beginning to pick up nationally, there are still plenty of places that look like ghost towns.
I saw the trailer for a new Will Smith movie "After Earth" which is another in a series of dystopian thrillers Hollywood has released recently. I remarked to Sue that Hollywood is making a bundle off Obama's horrible economy. Things are so bad, that people are escaping to movies that show an America that's in even worse shape.
I guess after watching one of these "end of the world" thrillers, they don't feel so bad about the economy after seeing how really horrible things can get compared to their present dreary situation.