US economic growth cooled in the first quarter as businesses cut back on investment and restocked shelves at a slower pace, but the biggest rise in consumer spending in more than a year cushioned the blow.
GDP expanded at a 2.2 percent annual rate, the Commerce Department said on Friday, moderating from the fourth quarter’s 3 percent rate.
Economists had expected somewhat firmer growth, but were taken by surprise by another big drop in defense spending. Still, growth was stronger than the 1.5 percent or less pace analysts had anticipated early in the quarter.
While the growth pace remained too slow to offer comfort to US President Barack Obama as he seeks a second term, it did not appear weak enough to alter the wait-and-see stance on monetary policy at the Federal Reserve.
“There’s nothing catastrophic happening, this is just slow growth and this underscores that the economy is on sound footing, but nothing more,” said Steven Baffico, chief executive at Four Wood Capital Partners in New York.
Government spending dropped for a sixth straight quarter as defense outlays fell and austerity at state and local governments showed few signs of easing.
A rise in demand for automobiles, which powered the largest pick up in consumer spending since the fourth quarter of 2010, helped offset the drag from government and business spending, which dropped for the first time since the recession ended.
The slump in business spending was likely to be temporary and related to the expiration of tax incentives for businesses, economists said. Corporations are sitting on a US$2 trillion cash pile.
In another heartening sign, home construction rose at its fastest pace since the second quarter of 2010, thanks to an unusually warm winter.
Economists said that while growth was not weak enough to spur the Fed into another round of bond buying, it still bolstered the central bank’s view that interest rates should be kept near zero at least through late 2014.
Though consumers took up the slack for growth in the first quarter, some details of the report painted a somewhat weak picture for the second quarter.
Consumer spending, which makes up about 70 percent of US economic activity, increased at a 2.9 percent rate in the first quarter after rising 2.1 percent in the final three months of last year.
Automakers had reported that sales rose by the most in four years during the first quarter. Part of that reflected pent-up demand after last year’s earthquake and tsunami in Japan left showrooms bereft of popular models.
Motor vehicle production contributed 1.12 percentage points to first-quarter GDP growth, more than double the prior quarter, and spending on so-called durable goods, like autos, rose at a 15.3 percent pace.
Consumer confidence was little changed this month, a separate report showed. The Thomson Reuters/University of Michigan’s final reading on the overall index on consumer sentiment inched up to 76.4 from 76.2 in March.
Inventories contributed just over half a percentage point to GDP growth compared to 1.81 percentage points in the fourth quarter. Still, that suggests that restocking could be a drag on second-quarter GDP growth.
Excluding inventories, GDP rose at a 1.6 percent rate. In the fourth quarter, the comparable figure was just 1.1 percent.
Rising inflation pressures as energy prices soared also restrained GDP growth. A price index for personal spending rose at a 2.4 percent rate, accelerating from the fourth quarter’s 1.2 percent pace.
A core measure that strips out food and energy costs advanced at a 2.1 percent rate, also quickening from 1.3 percent in the prior quarter.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
FUTURE PLANS: Although the electric vehicle market is getting more competitive, Hon Hai would stick to its goal of seizing a 5 percent share globally, Young Liu said Hon Hai Precision Industry Co (鴻海精密), a major iPhone assembler and supplier of artificial intelligence (AI) servers powered by Nvidia Corp’s chips, yesterday said it has introduced a rotating chief executive structure as part of the company’s efforts to cultivate future leaders and to enhance corporate governance. The 50-year-old contract electronics maker reported sizable revenue of NT$6.16 trillion (US$189.67 billion) last year. Hon Hai, also known as Foxconn Technology Group (富士康科技集團), has been under the control of one man almost since its inception. A rotating CEO system is a rarity among Taiwanese businesses. Hon Hai has given leaders of the company’s six