U.S. consumer spending, exports cloud growth outlook

Thu Jun 28, 2012 9:24am EDT
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WASHINGTON (Reuters) - U.S. consumer spending and export growth were not as robust as previously believed in the first quarter, suggesting less momentum in the economy.

The Commerce Department confirmed on Thursday that the economy grew at a 1.9 percent annual pace in the January-March period, but the mix of growth was not encouraging for the current quarter.

A separate report showed the number of Americans filing new claims for jobless benefits fell last week, but remained too high, indicating the job market was struggling to gain traction.

Economists said the stream of weak data could prompt the Federal Reserve to launch a third round of bond purchases to support the flagging recovery.

The U.S. central bank last week eased monetary policy further by extending a program to re-weight bonds it already holds toward longer maturities to hold down borrowing costs.

Consumer spending, which accounts for about 70 percent of U.S. economic activity, increased at a 2.5 percent rate in first quarter, rather than the previously reported 2.7 percent pace.

There are signs that consumer spending slowed in the second quarter, with retail sales falling in April and May.

Exports grew at a 4.2 percent rate instead of 7.2 percent. The loss of momentum in both consumer spending and exports bodes ill for second-quarter growth.

Second-quarter growth is forecast around 2 percent, but with global demand cooling amid Europe's debt woes and an uncertain fiscal policy path at home forcing households to be cautious, even that estimate might be too optimistic.   Continued...

A customer looks over produce at the Phoenix Public Market in Phoenix, Arizona August 23, 2011. REUTERS/Joshua Lott