US economy grows at slower rate - Los Angeles News | FOX 11 LA KTTV

US economy grows at slower rate

Posted: Updated:

By MARTIN CRUTSINGER

AP Economics Writer

WASHINGTON (AP) -- The U.S. economy grew at an annual rate of 1.8 percent in the first three months of the year, significantly slower than first thought. The steep revision was mostly because consumers spent less than previously estimated, a sign that higher taxes could be having a deeper impact on growth.

The Commerce Department revised its growth estimate for the January-March quarter down from a 2.4 percent annual rate. The revised rate was still faster than the 0.4 percent rate in the October-December quarter.

Economists had thought growth in the April-June quarter would be 2 percent or less, although the revision will likely change those estimates. They had also expected growth to strengthen in the second half of this year.

The Federal Reserve last week said that it would begin to slow its bond purchases later this year and end them next year if the economy continues to strengthen. The Fed's bond purchases have helped keep long-term interest rates low. The revision also may alter that plan, if growth stays weak.

The latest estimate was the government's third look at first-quarter growth. The bulk of the revision was because consumer spending was cut to an annual rate of 2.6 percent. That's sharply lower than the 3.4 percent rate estimated last month. Consumer spending accounts for 70 percent of economic activity.

Much of the change reflected a lower estimate for spending on services such as heat and electricity. Export growth was also trimmed as was investment spending by businesses in buildings.

An increase in Social Security taxes on Jan. 1 has reduced take-home pay for most Americans. A person earning $50,000 a year has roughly $1,000 less to spend, while a high-earning couple has less than $4,500.

Many economists had thought that the tax increase, along with steep government spending cuts, would start to affect consumers in the second quarter, which ends next week. But the revision suggests the tax increase may have hampered consumer spending a little earlier than thought.

Economists had predicted that growth would rebound to a rate of around 2.5 percent in the July-September quarter and to more than a 3 percent rate in the final three months of the year.

The Fed's latest economic projections are for growth of 2.3 percent to 2.6 percent this year. And it predicts that growth will accelerate next year to as much as 3.5 percent.

The latest reports have been encouraging. U.S. factories are fielding more orders. Home sales and prices are rising, signaling a stronger housing recovery. Spending at retail businesses rose in May. And employers added 175,000 jobs last month, which almost exactly matched the average increase of the previous 12 months.

Steady job growth has gradually reduced the unemployment rate to 7.6 percent from a peak of 10 percent in 2009. And it has lifted Americans' confidence in the economy to its highest point in 5 1/2 years.

Consumers' confidence in the economy is watched closely because their spending accounts for about 70 percent of U.S. economic activity.

AP-WF-06-26-13 1303GMT

  • Your MoneyMore>>

  • Some StubHub accounts breached

    Some StubHub accounts breached

    Wednesday, July 23 2014 4:34 PM EDT2014-07-23 20:34:20 GMT
    Six people were indicted Wednesday in an international ring that managed to take over more than 1,000 StubHub users' accounts and fraudulently buy tickets to such prime events as Jay-Z and Elton John concerts, a New York Yankees-Boston Red Sox game and Broadway shows like "The Book of Mormon," the Manhattan district attorney said. Manhattan District Attorney Cyrus R. Vance Jr. said the thieves would then resell the tickets and split up the proceeds.
    Six people were indicted Wednesday in an international ring that managed to take over more than 1,000 StubHub users' accounts and fraudulently buy tickets to such prime events as Jay-Z and Elton John concerts, a New York Yankees-Boston Red Sox game and Broadway shows like "The Book of Mormon," the Manhattan district attorney said. Manhattan District Attorney Cyrus R. Vance Jr. said the thieves would then resell the tickets and split up the proceeds.
  • Manhattan West Project

    Skyline of West Side is changing

    Skyline of West Side is changing

    Tuesday, July 22 2014 6:25 PM EDT2014-07-22 22:25:22 GMT
    The Manhattan West Project is a $4.5 billion development that will change the skyline on the West Side. The five-acre site that will consist of office towers, a residential building, retail, a 5-star hotel, health and fitness facilities, rooftop gardens, restaurants, cafes, and a park is being built on top of active rail yards. Fox 5 got a look at the progress of the project.
    The Manhattan West Project is a $4.5 billion development that will change the skyline on the West Side. The five-acre site that will consist of office towers, a residential building, retail, a 5-star hotel, health and fitness facilities, rooftop gardens, restaurants, cafes, and a park is being built on top of active rail yards. Fox 5 got a look at the progress of the project.
  • Beach fashion

    Long-sleeved swimsuit is latest beach and pool fashion trend

    Long-sleeved swimsuit is latest beach and pool fashion trend

    Monday, July 21 2014 6:13 PM EDT2014-07-21 22:13:49 GMT
    You have lots of ways to look stylish on the beach, from a bikini to a tankini to a one piece. But the newest trend is long-sleeved swimsuits -- modesty takes precedence over a golden glow. The new beachwear is turning up on sites like ASOS and on luxury sites like Neiman Marcus. There are one piece versions and crop top versions.One of the pioneers of the trend is Dallas-based clothing company Cover.
    You have lots of ways to look stylish on the beach, from a bikini to a tankini to a one piece. But the newest trend is long-sleeved swimsuits -- modesty takes precedence over a golden glow. The new beachwear is turning up on sites like ASOS and on luxury sites like Neiman Marcus. There are one piece versions and crop top versions.One of the pioneers of the trend is Dallas-based clothing company Cover.
Powered by WorldNow

KTTV FOX 11
1999 S. Bundy Dr.
Los Angeles CA 90025

Main: (310) 584-2000
News Tips? (310) 584-2025

Didn't find what you were looking for?
All content © Copyright 2000 - 2014 Fox Television Stations, Inc. and Worldnow. All Rights Reserved.
Privacy Policy | Terms of Service | Ad Choices