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Economy likely grew 3.4 percent in first quarter


By Lucia Mutikani

Friday, April 30, 2010; 12:15 AM
(Washington Post)

WASHINGTON (Reuters) – U.S. economic growth probably slowed in the first quarter, data is expected to show on Friday, but resurgent consumer spending should offer evidence of a sustainable recovery.

The economy expanded at a 3.4 percent annual rate in the first three months of the year, economists polled by Reuters believe. That would mark a slowdown from the 5.6 percent pace logged in the fourth quarter when the economy got a big lift as businesses curbed efforts to cut inventories.

The advance report on U.S. gross domestic product from the Commerce Department due at 8:30 a.m. should mark three straight quarters of growth as the economy digs out of its worst recession since the Great Depression.

GDP measures total goods and services output within U.S. borders.

Though the economy took a step back from its brisk pace in late 2009, Friday’s report should show areas such as consumer and business spending proved more robust in the first quarter, analysts said.

The bulk of the growth in the fourth quarter came as businesses met more demand with new production and less by selling off goods sitting on the shelf.

Inventories are expected to play a lesser role in the first quarter, when consumers are seen taking up the baton.

“The key thing for sustaining and growing the U.S. economy is consumer spending. Everything we know about the first quarter is looking very strong in that area,” said Kurt Karl, head of economic research at Swiss Re in New York.

Data that has already come in on consumer spending has been robust. Analysts expect consumer spending during the quarter grew at a rate anywhere between 3.2 percent and 4 percent.

Consumer spending, which normally accounts for about 70 percent of U.S. economic activity, grew only at a 1.6 percent pace in the fourth quarter.

There have been worries the U.S. recovery, which has been led by the manufacturing sector as businesses begin to rebuild inventories, could sputter if consumers did not come on board. These concerns are beginning to take a back seat.

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