US economy grows 2.2% in Q1 but misses forecast

The US economy expanded less than forecast in the first quarter as a smaller contribution from inventories overshadowed the biggest gain in consumer spending in more than a year.

Gross domestic product, the value of all goods and services produced in the US, rose at a 2.2 per cent annual rate after a three per cent pace, Commerce Department figures showed today in Washington. The median forecast of economists surveyed by Bloomberg News called for a 2.5 per cent rise. Household purchases increased 2.9 per cent, exceeding the most optimistic projection. Homebuilding grew the fastest in almost two years.

Job creation and income gains were enough to propel sales at car dealerships and retailers like Target Corp, helping make the US more resilient to weakness in overseas markets. The report confirms the view of Federal Reserve officials who this week said they expect “moderate” and repeated that borrowing costs are likely to stay low at least through late 2014.

“Consumers are remarkably stable and steady,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who correctly estimated first-quarter GDP. “We’ll need to see final demand continue to improve. We’re still in muddling-along territory.”

Stocks rose as earnings at companies such as Amazon.com Inc. beat analysts’ estimates. The Standard & Poor’s 500 Index climbed 0.3 per cent to 1,403.7 at 9:40 am in New York. Treasuries were little changed, with the 10-year note yield at 1.95 per cent compared with 1.94 per cent late yesterday.