WASHINGTON: The economy expanded at a 1.9 percent annual rate in the first three months of the year, a weak pace that few economists see changing much this year.
The Commerce Department on Thursday made no change in its third and final estimate for growth in the January-March quarter. Slower growth in consumer spending was offset by faster growth in businesses investment in buildings, leaving the overall pace the same.
Most economists say growth has likely stayed the same or possibly weakened since then. A sluggish job market and diminished consumer and business confidence have likely kept the economy from accelerating in the April-June quarter.
Growth of around 1.9 percent typically generates roughly 90,000 jobs a month. That’s too weak to lower the unemployment rate, which was 8.2 percent last month.
Separately, the Labor Department said the number of people seeking weekly unemployment benefits fell but not enough to signal stronger hiring in June.
Applications declined by 6,000 to a seasonally adjusted 386,000. When applications rise above 375,000, it generally means that hiring isn’t strong enough to rapidly lower the unemployment rate.
The government offers three estimates for gross domestic product, or GDP, which is the output of all goods and services. It includes everything from a cup of coffee to production of military jets.
Consumer spending accounts for roughly 70 percent of economic activity. It grew at a 2.5 percent annual rate in the first quarter, slightly below the previous 2.7 percent estimate.
Jennifer Lee, senior economist at BMO Capital Markets, said the faster growth in business investment was largely attributable to more spending on buildings and factories. That could be a sign that businesses are expanding.
And home construction grew at an annual rate of 20 percent, even better than estimated a month ago.
Many economists say the housing market is finally starting to recover and that housing will contribute to annual growth for the first time in five years.
“So on net, no change,” Lee said. “The components point to stronger business investment in structures and housing, but slower growth in the all-important consumer spending and trade.”
Some economists are hopeful that consumer spending could rise in the second half of the year, based in part on lower gas prices.
But some analysts warn that without more hiring and better pay increases, most Americans could spend less. A survey of consumer confidence fell in June for the fourth straight month. The Conference Board said worries about the job market outweighed lower gas prices. The Federal Reserve has downgraded its forecast for the year. It now expects growth of just 1.9 percent to 2.4 percent for 2012.