Saturday, May 01, 2010

Consumers Step Up Spending, Bolstering Growth

The U.S economy grew in the first quarter, as consumers finally started spending again. Since consumer spending accounts for about 70% of economic activity, increased spending always means a boost for the economy. According to this MSN article, the economy expanded at a 3.2 percent annual rate, the strongest sign yet of economic recovery.

While growth slowed from the fourth quarter's rapid 5.6 percent pace and was a touch weaker than economists expected, the details of the report from the Commerce Department on Friday were fairly upbeat.

Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, added nearly 2.6 percentage points to U.S. gross domestic product last quarter, the biggest contribution since the fourth quarter of 2006.

"Once you take a quick look under the hood you see some very positive signs there," said Ward McCarthy, chief financial economist at Jefferies & Co. in New York. "This is just the latest piece of evidence to suggest that the recovery is sustainable."

Still, markets showed some disappointment. U.S. stock markets were lower, while prices for U.S. government debt edged up. The dollar was little changed.

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