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U.S economy grows at sluggish pace of 0.4 percent

By Catholic Online (NEWS CONSORTIUM)
March 28th, 2013
Catholic Online (www.catholic.org)

The U.S. economy has grown in the first few months of 2013, but at a very slow, sluggish rate of 0.4 percent. Employers are hiring, people are buying, but it's just not enough. Hope springs eternal that growth will pick up shortly.

LOS ANGELES, CA (Catholic Online) - According to the Commerce Department, the economy grew at an annual rate of 0.4 percent in the October-December quarter, slightly better than the previous estimate of 0.1 percent growth. This proved of stronger business investment and export sales.

Analysts believe the economy is growing at a rate of around 2.5 percent in the current January-March quarter, which ends shortly.

Employers have been hiring more workers, and have kept consumers spending this year. A rebound in company stockpiling, further gains in housing and more business spending also likely drove faster growth in the first quarter.

There was no disguising the fact that the 0.4 percent growth rate was the weakest quarterly performance in almost two years, following a much faster 3.1 percent increase in the third quarter. The fourth quarter was hurt by the sharpest fall in defense spending in 40 years.

The economy grew 2.2 percent in 2012 after a 1.8 percent increase in 2011 and a 2.4 percent advance in 2010. Since the recession ended in mid-2009, the economy has been expanding at sub-par rates as a string of problems from higher gas prices to Europe's debt crisis have acted as a drag on the U.S. economy.

Tax increases that began with the New Year, coupled with automatic government spending cuts totaling $85 billion started to take effect on March 1. The Congressional Budget Office has estimated that the combination of tax increases and spending cuts could trim economic growth this year by about 1.5 percentage points. The CBO is predicting just 1.5 percent growth for 2013.

The good news is that the economy is showing signs of holding its own against the fiscal drag.

Employers have added an average of 200,000 jobs a month since November, lowering the unemployment rate in February to 7.7 percent, a four-year low.

Economists expect similar job gains in March, in part because a measure of unemployment benefit applications fell this month to a five-year low.

Home sales were also up. The sale of previously occupied homes rose in February to the highest level in nearly three years, while builders broke ground on more houses and apartments. Annual home prices jumped in January by the most since June 2006, according to a closely watched measure.

Stock prices have surged, with the Standard & Poor's 500 index was within two points of its all-time high.

All of that is making consumers feel wealthier, which could lead to more spending. Consumer spending drives 70 percent of economic activity.

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