Obama positive over economic outlook

President Barack Obama states the US economy is ‘in a much better place’ than a year ago as growth figures for the first three months of the year spur hopes of a solid recovery.

‘The economy that was losing jobs a year ago is creating jobs today,’ Obama stated on Thursday. ‘We’re moving forward. Our economy is stronger.’

Earlier the Commerce Department reported US gross domestic product (GDP) grew 3.2 per cent pace in the first quarter, up from minus 6.4 per cent at the same time last year.

The first estimate was just below market expectations for growth of 3.3 per cent, but marked the third consecutive quarter of economic expansion as Americans began spending more.

That was seen as further evidence that the world’s largest economy is slowly recovering from the worst economic crisis since the 1930s.

‘Our economy is stronger. The economic heart beat is growing stronger,’ Obama said.

Although positive, many fear the current rate of growth is not enough to recover the eight million US jobs lost since the crisis began.

The rate of growth was well down on the final quarter of 2009, when GDP was estimated at 5.6 per cent, the strongest growth in six years.

‘While today’s GDP report is an important milepost on our road to recovery, it doesn’t mean much to an American who has lost his or her job and cannot find another,’ Obama acknowledged.

Analysts saw the figures as ‘further confirming the end of the recession and that the recovery is only moderate and disappointing,’ according to Peter Morici of the University of Maryland.

‘Looking ahead, data are not encouraging. After such a long and damaging recession, we should anticipate several quarters of five per cent growth.’

Some predict that economic growth might falter later this year, or will not be enough to cut into near double-digit unemployment.

‘Unless the pace of growth picks up significantly we will see high unemployment rates for years to come,’ stated Josh Bivens of the Economic Policy Institute.

‘If we grew at the 3.2 per cent rate that characterised the past three months for next three years, we would see unemployment rates higher than were reached at any time during the 2001 recession.’

But market-watchers took solace from news that household consumption – traditionally a key driver of the US economy – was up 3.6 per cent.

‘Consumers spent a lot more on everything,’ stated Joel Naroff of Naroff Economic Advisers.

Consumer spending was at its highest level since the begin of 2007, before an economic collapse

Spending on long-lasting durable goods jumped 11.3 per cent, well up on the previous quarter. Spending on services also increased to the quickest rate since the first quarter of 2007.

‘The increase in real GDP in the first quarter primarily reflected positive contributions from personal consumption expenditures,’ the Labour Department said.

Companies also continued to rebuild their inventories, pushing growth higher.

According to Dean Barker of the Centre for Economic and Policy Research, that is ‘the first increase in inventories since the first quarter of 2008′. But that was offset by increased imports and reduced government spending.

The biggest hit came from a fall in government spending, which was down 3.8 per cent at say and local level, as authorities struggled to balance their books.

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Submited at Saturday, May 1st, 2010 at 8:00 am on Politics by hilman
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