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First-Quarter US GDP Estimates Slashed

The rate of consumer spending was also revised downward


New York City Wall Street American FlagOn Wednesday, the Commerce Department announced that the U.S. economy grew at a slower pace than previously estimated during the first quarter of this year.

The government cut the gross domestic product’s (GDP) annual rate of expansion for the first three months of 2013 from a previously-stated 2.4%, down to 1.8%. That disappointed economists who had predicted the growth rate to remain unchanged, Reuters noted.

When Bad Economic News is Good News
When Bad Economic News is Good News

Despite the reduction, the economy still showed more strength during the first quarter of 2013 than it did in the final quarter of 2012, when it expanded at just a 0.4% rate. However, removing inventories, the economy grew at just 1.2% during the first quarter, the weakest level of growth in two years.

According to the Commerce Department’s new estimate, consumer spending increased at just a 2.6% rate, down from the 3.4% rate in earlier estimates.

The lower economic growth estimates come after the U.S. Federal Reserve signaled plans to slow down its monthly bond-buying later this year. The Fed’s commitment to continuing economic stimulus efforts has caused wild swings in stock market indexes and commodities prices.

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