"We just got off to a slower start than expected. The second half will be better"
-Maury Harris, the New York-based chief economist for UBS Securities LLC
The growth of the world's largest economy was more tepid than initially estimated during the first three months of this year, reflecting weak spending on services by consumers, who are still struggling from recent budget cuts and tax hikes. According to data from the Commerce Department, the U.S. gross domestic product expanded at a revised 1.8% annualized rate in the period from January through March, compared with a prior estimate of 2.4%. The main reason for such a disappointment was that the household spending, which accounts around 70% of the economy, were revised down to 2.6% increase from 3.4% gain estimated last month.
The majority of analysts, however, expected first-quarter GDP growth to stay unrevised at 2.4%. In the meantime, when measured from the income side, the U.S. economy grew at a 2.5% pace, slower than the 2012's last quarter, when the economy expanded 5.5%. Details of the report showed that practically all growth categories were revised downward, with the exception of home construction and government, raising concerns that Federal Reserve's upbeat assessment of the economy does not reflect the real situation within the country. Another warning signal was sent from exporters, which registered a 1.1% contraction in shipments in the first quarter, cutting 0.15 percentage point from overall economic output and reflecting a slowdown in the global economy.
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