Economy picks up, but still disappoints
GDP expanded at a 2.5 percent annual rate in the first quarter. Economists expect slowdown in GDP growth this summer as sequester takes hold, which already delayed air traffic briefly.
GDP good, but not great: Economic growth quickened in the first quarter of 2013, but not at the pace analysts expected or hoped for. US GDP (gross domestic product) expanded at a 2.5 percent annual rate in the first quarter, according to a report released by the Commerce Department Friday. The growth was propelled by an acceleration in consumer spending, housing, and business investment.
Because the last quarter of 2012 was so stagnant, with GDP only expanding at a paltry 0.4 percent annual pace, many analysts expected first quarter GDP to rebound at least 3 percent.
The numbers were “softer than our forecast and the consensus (both 3.0 percent),” Barclays economist Peter Newland wrote in an e-mailed analysis. “That said, much of the pattern of growth within the expenditure components … met broadly with our expectations, with a sharp rebound in inventory accumulation, a pickup in consumption growth, modest growth in business investment and another sizable drag from government spending.”
Analysts are warning, too, that this could be as good as it gets for 2013, as consumers and businesses start to feel the effects of the sequester and the expiration of the payroll tax holiday. For more, read Monitor Business Editor Laurent Belsie’s take on the GDP report.
Sequester takes flight, briefly: The Federal Aviation Administration had to furlough air traffic control staff as a result of federal spending cuts stemming from the sequester, resulting in widespread flight delays across the country. “Yesterday more than 1,200 delays in the system were attributable to staffing reductions resulting from the furlough,” the FAA said in a statement Tuesday. "That’s about 5 percent of all flights on a typical day.”
The delays, predictably, did not go over well, and Congress moved quickly to resolve them. The Senate passed an overnight bill Thursday to end the furloughs, and the House passed a similar bill Friday. President Obama is expected to sign it into law, which will allocate up to $253 million to the FAA to prevent “reduced operations and staffing” through September.
Jobless claims drop again: The number of people applying for unemployment benefits fell for the second week in a row, with initial claims dropping by 16,000 to 339,000, according to the Labor Department, The number was slightly lower than analysts’ predictions, an encouraging sign that the job market is improving.
Housing continues to improve: Existing home sales were down slightly this week, but new home sales and home prices showed growth, and economists were confident that the numbers were encouraging signs that the housing market is on the right track for the long haul.