WASHINGTON: The U.S. economy grew more slowly in the first three months of this year. Stronger consumer spending was offset by cutbacks in government spending and by businesses restocking their shelves at a slower pace.
The Commerce Department as cited in AP says the economy expanded at an annual rate of 2.2% in the January-March quarter, compared with a 3% gain in the final quarter of 2011. Consumers spent at the fastest pace in more than a year.
In 2011, the economy grew just 1.7% . But growth is expected to rebound to around 3% for all of 2012 as stronger job growth spurs increased consumer spending.
Meanwhile, Bloomberg reported U.S. stocks rose, sending the Standard and Poor’s 500 Index toward the biggest weekly rally in a month, as better-than-estimated corporate earnings overshadowed lower-than-forecast growth in the American economy.
The S&P 500 advanced 0.3% to 1,404.14 at 9:31 a.m. New York time. The benchmark measure has risen 1.6% since April 20 and was poised for a back-to-back weekly gain.
“The economy is not gangbusters, but the chance of a recession is dimming,” Michael Mullaney, who helps manage US$9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a telephone interview. “We’re encouraged by the earnings surprises. We’re not happy with today’s GDP data, but it shows domestic spending being on track.”
About 75% of the 271 companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates, according to data compiled by Bloomberg.
Eight out of 10 groups in the S&P 500 delivered better-than-forecast results, as financial, telephone and technology companies led with a positive rate of more than 10%, the data showed. Earnings rose 6.9% on average, according to the data.
Equities rose even after U.S. economy data showed. A separate report may show the Thomson Reuters/University of Michigan final index of consumer sentiment cooled from a one-year high.
Stocks advanced along with the economy in the first quarter. The S&P 500 climbed 12%, including a 3.1% gain in March. That marked the strongest three-month start to a year since the first quarter of 1998. The benchmark gauge has rallied 11% in 2012 and is down 0.6% this month. If the S&P 500 erases its April drop, it will cap the fifth straight month of gains, the longest winning streak since 2009. (AP/Bloomberg/T07/aph)