Gross Domestic Product (GDP)-the output of goods and services produced by labor and property in the United States-advanced at an annual rate of 2.5% from January through March. The numbers paint a story similar to previous quarters: consumer spending and housing increased, while government expenditures decreased. For example, consumer spending grew 3.2%, clocking the fastest rate since 2010, driven by an 8.1% increase in durable goods purchases (e.g. autos and appliances, etc.).
Residential housing was another bright spot, growing at a 12.6% clip.On the other hand, government spending fell 4.1% in the March quarter, compared to a 7% decrease in the December quarter. National defense spending fell 11.5% which comes on the heels of a 22.1% drop in the December quarter. These results signal the early effects of sequestration.
Although the economy grew in the first quarter, the 2.5% increase lagged economists’ expectations for 3% growth, according to a Bloomberg survey. Once again, the results underscore how uninspiring and sluggish the current economic recovery is compared to previous turnarounds. For example, although GDP has expanded for 15 consecutive quarters, the average growth rate of 2% is the lowest for any recovery since World War II. To put this cycle into perspective, average annual GDP growth expanded at a 2.6% clip from 2001 to 2007, and 3.7% from 1991 to 2000, according to figures supplied by the Commerce Department and Bureau of Economic Analysis. It was as high as 4.4% from 1980 to 1981.