US economy grows by 2.5%

The US economy has grown by an annual rate of 2.5% in the first three months of this year. Whilst this figure was lower than analysts’ predictions, it’s a massive increase on the 0.4% rate recorded in the last quarter of 2012.

The growth has been explained by an increase in consumer spending. The country has seen consumer spending figures rise by 3.2% – the strongest growth in this area for two years.

Figures released by the Commerce Department also show that government spending fell by 4.1%.

Consumer spending accounts for two thirds of US economic activity, and the 3.2% rise during the first quarter is the fastest rate since the fourth quarter of 2012. However, economists suggest that spending is slowing.

The fall in government spending is one the main reasons that economists are concerned. Earlier this year, in March, more than $85bn was cut from government spending budgets. The defence sector is expected to bear the brunt of the cuts.

Economist Rob Carnell said the figures showed a ‘sharp softening’ in growth as of March, indicating further weakening over April and May.  He said the second quarter of the year could be ‘substantially weaker’ with a ‘rogue negative quarter’ even possible.

The US recession officially ended in June 2009, but growth has been substantially weaker than expected. The economy grew by 2.4% in 2012, 1.8% in 2011 and 2.2% in 2012. Analysts hoped that they would see a more robust growth of 3 or 4%. However, the US economy has grown for 15 consecutive quarters.

The US economy is performing well compared to other developed countries. In 2012, Germany’s economy grew by 0.7%, France’s economy was flat, and Italy’s shrank by 2.4%.

In the UK, the economy grew by 0.3% in the first quarter of 2013, avoiding a triple dip recession.

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