US economic growth cooled in the first three months of 2012 as businesses cut back on investment and restocked shelves at a moderate pace.
However, consumer spending — which accounts for nearly three quarters of US economic activity — did increase at a 2.9 percent rate, better than the 2.1 percent at the end of last year.
Overall gross domestic product expanded by 2.2 percent from the same period a year earlier, moderating from the fourth quarter of 2011’s three percent rate. But in Q4 inventory building accounted for nearly two thirds of the economy’s growth.
Economists had been looking for better this time round, predicting 2.5 percent growth just before the release of the data.
The figures present a mixed picture; the positives included more cars being bought. Motor vehicle sales rose by the most in four years as a spurt in job growth encouraged some households to replace older vehicles.
But the fear is that with hiring recently showing signs of slowing, consumer spending could soften in the second quarter.
“There’s nothing catastrophic happening, this is just slow growth and this underscores that the economy is on sound footing but nothing more,” said Steven Baffico, chief executive at Four Wood Capital Partners in New York.
The pace of growth still remains too soft to offer comfort to President Barack who is seeking a second-term in office. It is not enough to significantly bring down the unemployment rate.