Economic expansion solid
Consumer spending up sharply for quarter
WASHINGTON – The Great Recession is over all but officially, as the U.S. economy grew at a solid 3.2 percent annual rate in the first three months of this year, the third consecutive quarter of growth, the Commerce Department reported Friday.
Spending by both consumers and business powered the growth. Consumption rose 3.6 percent from January through March, the department said in its preliminary reading, a sign that consumers, who drive 70 percent of U.S. economic activity, were feeling more comfortable with their economic positions. Their spending rose at only a 1.6 percent annual rate the previous quarter.
Business investment was robust as well, showing that the economy’s expansion has more than one engine, which bodes well for sustaining it.
President Barack Obama said the GDP numbers are heartening but not enough.
“What this number means is that our economy as a whole is in a much better place than it was one year ago,” Obama said, adding that “the economy that was losing jobs one year ago is adding jobs.”
However, the president noted that many Americans still feel trapped in a downturn. “I measure progress by a different pulse – the progress the American people feel in their own lives,” he said.
Analysts cheered the data.
“Consumers drove growth during the quarter as rising stock prices got high-income consumers out shopping again,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “Most encouraging was another quarter of strong business investment in equipment and software, suggesting that they are getting their groove back and will soon resume hiring more aggressively.”
Increases in business spending and equipment investment – up 4.1 percent and 13.4 percent, respectively – are important, because they signal that growth wasn’t fueled by firms clearing out their warehouses and stockrooms. Such inventory reduction helped drive growth to a blistering 5.6 percent annual rate in the last three months of 2009, a number that wasn’t expected to carry over into the first quarter of this year and did not. Inventory reduction fell by 3.8 percentage points from January through March.