US Economic Growth Slows in Q1
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The US Federal Reserve has revised its economic forecast for 2011 after slower than expected growth in the first quarter of the year. “We’ve sputtered a bit here,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
The US Federal Reserve has revised its economic forecast for 2011 after slower than expected growth in the first quarter of the year. “We’ve sputtered a bit here,” said Sam Bullard, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
According to the statistics substantiated by the Commerce Department, first quarter GDP growth shrunk to 1.8 percent, compared to the 3.1 percent growth recorded in the last quarter of 2010. Higher food and petrol prices also dampened consumer spending during this period and caused inflation to rise at its fastest pace in two and a half years.
Federal Reserve chairman, Ben Bernanke, warned the public on Wednesday of higher inflation and slower economic growth as the Federal Reserve attempts to keep interest rates on hold. The range of estimates for GDP growth this year was cut to 3.1% to 3.3%, from 3.4% to 3.9% estimated in January. Inflation rates are also expected to be “sharply higher” than the 0.958 percent rate forecasted earlier this year.
On a positive note, 216,000 new jobs were added in March 2011, the most in 10 months, while the unemployment rate fell to 8.8 percent in the same month, the lowest it’s been in 2 years. Mr. Bernanke also stressed that while there is “possibly just a bit less momentum in the economy”; the current economic slowdown and higher inflation rates were purely “transitory”.
Most economists have expressed careful optimism over the latest data.
“We’re still looking for about a 3 percent second-quarter growth rate. The 1.8 percent wasn’t quite as bad as it looks,” said David Wyss, the chief economist for Standard & Poor’s.
Chris Williamson, the chief economist at Markit, pointed to other indicators that may paint a rosier picture.
“Reassuringly, surveys such as the ISM Purchasing Managers’ Index suggest that the economy retains strong momentum, and global PMI data indicate that export markets are showing resilient growth… the recovery appears to now be generating jobs in meaningful numbers, which should help bolster domestic demand and ensure the recovery becomes self-sustaining.”
Read the full story from CNBC.
Read the US economic forecast on EconomyWatch.
