-Yelena Shulyatyeva, a U.S. economist at BNP Paribas SA
A drop in government spending and tax hikes dragged more on the world's largest economy than initially thought in the first quarter of 2013, a sign of increasing pain from Washington's austerity measures. Data from the Commerce Department showed that the nation's gross domestic product rose at a 2.4% annualized rate, down from an initial estimate of 2.5%, and below analysts' expectations of 2.5% growth.
Growth was held back as the government cut their spending across all levels of government, while businesses outside the farm sector produced less goods. The U.S. avoided falling from a so-called "fiscal cliff" but the government decided to ramp up austerity measures in 2013, hiking taxes in January and slashing the federal budget in March. Despite these measures, the economic growth has been surprisingly resilient, supported by the Federal Reserve's low interest rate policies and quantitative easing programme.
Another report from the Labor Department showed that more Americans filled new claims for unemployment benefits last week, as holiday closures prevented five states from completing a full count. Applications for jobless benefits jumped 10,000 to 354,000 in the week ended May 25. The less-volatile four-week moving average of claims also climbed to 347,250 from 340,500.
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