US economy growth falls back

Economic growth in the US slowed to an annualised 2.2 per cent during the first quarter, from three per cent in the last three months of 2011, reports the BBC.

The figure was less than the 2.5 per cent which economists had forecast and equates to 0.5 per cent growth quarter on quarter. The US Commerce Department stated that gross domestic product (GDP) had been depressed by businesses cutting back on investment.

However, an improved performance in the automobile market helped the growth figure. Even though the headline figure came in at lower than had been anticipated, one of the key driving forces during the fourth quarter was stockpiling by US companies.

This quarter, consumer demand was higher. Consumer spending, which makes up around 70 per cent of the economy in the US, increased by an annual rate of 2.9 per cent, the quickest pace since the final quarter of 2010.

Sales of motor vehicles went up by 2.1 per cent over the fourth quarter, the quickest for four years. Meanwhile, home construction, boosted by warmer weather, grew at its fastest rate since Quarter Two of 2010.

However, the news was not so positive in terms of business spending, which dropped for the first time since the end of 2009, while government spending – especially defence spending – declined too. It fell by 2.1 per cent, a dramatic turnaround from the fourth quarter of last year, in which there was growth of 5.2 per cent.