Economic growth was slower than previously estimated in the first quarter as estimates of business and consumer spending were cut, according to government data on Friday.
KEY POINTS: * U.S. economic growth was slower than previously estimated in the first quarter as estimates of business and consumer spending were cut, according to government data on Friday. * In its final estimate, the Commerce Department said gross domestic product expanded at a 2.7 percent annual rate instead of the 3 percent pace it reported last month. * Although the growth pace was below market expectations for a 3 percent rate, it still marked three straight quarters of expansion as the economy digs out of its most brutal downturn since the 1930s. * However, recent data have suggested the recovery lost some momentum in the second quarter, with persistently high unemployment restraining consumer spending, and home building and purchases faltering.
JAMES COX, MANAGING PARTNER, HARRIS FINANCIAL GROUP, COLONIAL HEIGHTS, VIRGINIA:
The consumption component of this revision was the most troubling to me. It speaks to the contraction of the money supply that has been occurring over the past several months.
I do think this speaks to a slowdown. This may be a temporary phenomenon but it bothers me a little bit that all of
the data in a synchronized fashion throughout the week have been negative.
This does not signal a double dip recession. What we are seeing is just a slowdown. Stimulus is burning off and consumer demand is not really robust.
JOHN DOYLE, SENIOR CURRENCY STRATEGIST, TEMPUS CONSULTING, WASHINGTON:
Obviously, the data is slightly worse than expectations, but consumer spending did meet expectations. The dollar's response has been muted, and as we move through the day, I would expect mostly range-bound trade. We have seen U.S. interest rate expectations hindered a bit lately, though, especially after the Fed came out with slightly more dovish comments than many had expected this week. The mixed GDP report just adds to the slight risk aversion moving forward.
JAY FELDMAN, VICE PRESIDENT AND ECONOMIST, CREDIT SUISSE FIRST BOSTON, NEW YORK:
It's a little bit lighter than expected, but I think it's old news at this point - it's the first quarter. It probably won't have an effect on the dollar, it's a small revision.
I think the second quarter is showing perhaps some acceleration, we think in Q2 it will be more than 4 percent, the second half will be closer to 3 percent.
PAUL BALLEW, CHIEF ECONOMIST, NATIONWIDE, COLUMBUS, OHIO
You still have consumer expenditures growing 2.0 to 3.0 percent. Overall we have a modest recovery going on, which is not a surprise.
The conversation of a double-dip recession is a bit aggressive. You are getting growth in fits and starts, rather than an outright contraction. We are not generating real income growth that we like. It's a recovery that has a real weight on its back. There are a lot of headwinds that include housing and tax increases next year.
MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC Capital MARKETS, TORONTO: A bit of a disappointment with this report. It's on the softer side of expectations and with the recent slew of soft data from the U.S., it actually support this week's FOMC cautious statement. It also support a risk-off sentiment in the forex markets.
MARKET REACTION: STOCKS: U.S. stock index futures cut gains BONDS: U.S. Treasury debt prices rose DOLLAR: U.S. dollar rose against the euro and yen