The government lowered its estimate of how much the economy grew in the first quarter of 2010, noting that consumers spent less than it previously thought.
The country’s gross domestic product rose by an annual rate of 2.7 percent for January through March, the Commerce Department said on Friday. That was less than the 3 percent estimate for the quarter that the government released last month. It was much slower than the 5.6 percent pace in the previous quarter.
The economy has now grown for three consecutive quarters after shrinking for four straight quarters in the recession, the longest contraction since World War II.
In normal times, 2.7 percent growth would be considered healthy. But it is relatively weak for a recovery after a steep recession. After the last sharp downturn in the early 1980s, G.D.P. grew at rates of 7 to 9 percent for five quarters in a row.
“It’s what I call a halfhearted economic advance,” said Stuart G. Hoffman, chief economist at PNC Financial Services. The economy is likely to grow at a similarly modest pace for the rest of the year, he said. That may reduce joblessness, but slowly. He predicted a slight reduction in unemployment, now at 9.7 percent, to about 9.3 percent by the end of the year.
The European debt crisis is likely to slow world trade in the second half of the year and businesses may pull back on spending once they have rebuilt their inventories, said Paul Dales, United States economist with Capital Economics.
“Overall, the U.S. economy may be performing much better than those in Europe, but this is still the weakest and longest economic recovery in U.S. postwar history,” Mr. Dales said.
Factories are churning out more steel, cars, appliances and other goods, but not because consumer demand is particularly strong. Instead, they are producing the goods for companies that let their stockpiles drop during the steep recession, to bring them in line with lower sales. Now those companies are restocking their warehouses as sales improve.
Once that process is complete, inventory restocking will provide less of an increase to G.D.P.
Another factor inhibiting growth will be a reduction in government spending. The impact of the federal stimulus program is expected to fade late this year. Economists also warn that state and local governments are likely to rein in spending and raise taxes as they struggle to close budget gaps. Growth of roughly 3 percent is needed just to generate enough jobs to keep up with population increases. Many economists say growth needs to reach 5 percent for a full year to reduce the jobless rate, now 9.7 percent, by one percentage point.
In the last three quarters, growth has averaged 3.5 percent.
G.D.P. measures the value of all goods and services produced in the United States and is considered the best measure of the country’s economic health.
Separately, the Reuters/University of Michigan consumer sentiment index for June rose to its highest level since January 2008, climbing to 76 from 73.6 in May.
By THE ASSOCIATED PRESS
Tags: businesses, commerce department, debt crisis, economists, economy grew, european economy, financial system, recessions, us consumer
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