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U.S. GDP Grows Slower Than Expected In First Quarter


The rate of growth of the U.S. economy slowed more than expected in the first quarter of 2012, according to figures released by the Commerce Department on Friday.

The initial estimate of first quarter GDP showed a 2.2 percent growth rate, down from the 3 percent growth seen in the final quarter of 2011.

While most economists had expected the rate of growth to slow compared to the fourth quarter, many forecast a somewhat stronger 2.5 percent growth rate.

The Commerce Department cautioned, however, that the initial estimate released Friday is based in part on incomplete data and is subject to revision.

The slowdown in the rate of economic growth was largely the result of a deceleration in private inventory investment and a downturn in non-residential fixed investment, which were partly offset by faster consumer spending and export growth.

Commenting on the data, Sal Guatieri, Senior Economist at BMO Capital Markets, said, "The U.S. economic expansion continues at a modest to moderate rate, with little momentum, but should pick up somewhat later this year as business investment gets back on track."

Non-residential fixed investment, which had increased by 5.2 percent in the fourth quarter, declined 2.1 percent in the first three months of 2012.

Real personal consumption expenditures, a measure of consumer spending, increased by 2.9 percent in the first quarter compared to the 2.1 percent growth seen in the fourth quarter.

As might be expected in a quarter with increased consumer spending, the U.S. personal savings rate fell to 3.9 percent from the 4.5 percent rate posted in the fourth quarter.

Exports of goods and services increased 5.4 percent in the first quarter, doubling the 2.7 percent growth posted in the fourth quarter. That increase was somewhat offset by an increase in imports, which were up 4.3 percent compared to the fourth quarter increase of 3.7 percent.

The Commerce Department also said its reading on consumer prices showed a 2.4 percent increase in the first quarter compared to the 1.2 percent increase seen in the fourth quarter.

Excluding food and energy prices, consumer prices increased by 2.1 percent in the first quarter, reflecting a notable acceleration from the 1.3 percent increase in the fourth quarter.

by RTTNews Staff Writer

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