U.S. GDP growth slows in first quarter – but American economy still grew 2.2 per cent over last year


By Harry Glass

PUBLISHED: 09:26 EST, 27 April 2012 | UPDATED: 09:38 EST, 27 April 2012

U.S. GDP grew less rapidly in the first quarter of this year than in the final months of 2011, official figures confirmed today.

Although growing 0.5 per cent quarter-on-quarter, this equated to an annualised growth figure of 2.2 per cent which was lower than the previous quarter’s 3 per cent rate.

Economists had estimated the economy growing 2.5 per cent at the annualised rate.

Ford Motoring: Car sales were at their highest in four years

The slowdown was put down to slashed investment by struggling businesses. The U.S. Commerce Department said companies bought less equipment and new software, while business spending fell for the first time since 2009 – from growth of 5.2 per cent it dropped 2.1 per cent.

One sector which drove the growth was the car market. Sales of vehicles rose by the fastest rate for four years, up 2.1 per cent.

Consumer spending rose at its fastest pace since the end of 2010, up 2.9 per cent compared to a year ago, and more homes were being built thanks to favourable weather.

There were differing opinions on what the Fed might do with regards pumping more money into the economy in the form of quantitative easing (QE).

Camilla Sutton, chief currency strategist at Scotia Capital, said it ‘opens the door for the Fed to remain dovish’, while Daniel Hwand, senior currency strategist at Forex.com in New York, said ‘this is negative for the dollar as it increases QE3 chances’.

But Richard Franulovich, senior currency strategist at Westpac in New York, was unconvinced.

‘The weaker-than-expected GDP growth is still consistent with moderate growth in the U.S.’ he said.  ‘I do not think that this in any way adds to speculation about QE3 because the numbers are within the Federal Reserve’s range.

‘We did get a move lower in the dollar against the yen, but in the end, all these moves could be short-lived.’

The reaction to the data on the FTSE 100 in London was slight. The Dow Jones has opened ever-so-slightly down, 4 points (0.03 per cent) to 13,200.5.


Posted on April 27, 2012, in Economy / Finance and tagged , , , , . Bookmark the permalink. Leave a comment.

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