The U.S. economy continued its sluggish recovery during the first three months of 2013. Spending cuts by the federal government and a slowdown in business investments thwarted any hope the economy would have stronger growth during the year’s first quarter.
The U.S. economy grew during the first three months by a yearly rate of 2.5%, said data released on Friday by the U.S. Department of Commerce.
The growth was a significant increase over the growth rate during the last quarter of 2012, which was just 0.4%, when deep defense budget cuts and less stockpiling by companies slashed any growth in the country.
However, even though there was a significant amount of growth during the quarter, it did not reach the 3% that market analysts had predicted.
Farms and other businesses replenished their inventories as was expected during the first quarter of 2013. This accounted for the majority of the GDP acceleration. The Gross Domestic Product is the total value of goods and services produced within the U.S.
Consumer spending in the U.S. represents over 66% of the entire economy. Spending was robust during the first three months, even though workers paychecks were less because of higher taxes, and consumers continued to buy more long term products including autos.
Spending on services, including healthcare, insurance and utilities increased during the first three months of the year at the fastest rate in more than 8 years. The country’s private economy remained strong, but the public sector continues to be a drag on the U.S. economy at a higher rate than originally expected because of the broad based governmental budget cuts both at the federal and state levels.