Economy in U.S. Grows at Faster Pace as Consumers Boost Spending

 

The economy in the U.S. grew at a faster pace in the first quarter, reflecting the biggest increase in consumer spending in two years as households overcame a drop in incomes by putting less money in the bank.

Gross domestic product rose at a 2.5 percent annual rate, lower than forecast, after a 0.4 percent fourth-quarter advance, Commerce Department figures showed today in Washington. The median estimate of 86 economists surveyed by Bloomberg called for a 3 percent gain. Consumer spending, the biggest part of the economy, climbed by the most since the fourth quarter of 2010.

A boost to wealth from rising stock and home prices combined with a reduction in savings to help Americans cushion an increase in the payroll tax that has now begun to pinch. Recent data signal the strength in other parts of the economy may also not be sustained as across-the-board cuts in planned federal spending, together with slower stockpiling, may be restraining investment and employment.

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