US Q1 growth rises, but less than forecast

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US Q1 growth rises, but less than forecast

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Economic growth in the United States picked up in the first three months of this year – but not as much as had been forecast.

That has increased worries that the already weakening US economy could struggle to cope with deep government spending cuts and higher taxes.

GDP expanded by 2.5 percent from the same period a year earlier. Economists had predicted three percent.

It had nearly stalled with a 0.4 percent annualised increase at the end of last year.

The improved growth came mostly from a rise in consumer spending in January and February, but partly that was more money being spent on heating due to unusually cold temperatures.

Americans also saved less after incomes dropped at a 5.3 percent rate in the first quarter. That is a bad sign for future spending growth.

The saving rate – the percentage of disposable income that households are putting in the bank – fell to 2.6 percent, the lowest since the fourth quarter of 2007, from 4.7 percent in the fourth quarter of 2012.

The US central bank, the Federal Reserve, will likely maintain its monetary stimulus due to the smaller-than-expected GDP increase and recent signs the US economy is weakening.

Data ranging from employment to retail sales and manufacturing weakened substantially in March after robust gains in the first two months of the year. There are indications the weakness has persisted into April.