Thursday, May 26, 2011

US consumers in spending retreat as economy continues to collapse

American consumers' spending weakened more than initially estimated in the first quarter of the year, renewing concerns about the pace of the economic recovery for the rest of the year.

Purchases by households climbed at an annual pace of 2.2pc during the first three months of the year, the US Commerce Department said on Thursday, shy of the 2.7pc it had first calculated. It was also weaker than the 2.8pc forecast by economists on Wall Street.

Although it was known that consumer spending had slowed from the final quarter of 2010, the new reading raised fears about whether the US consumer remains in a position to power an acceleration in growth later this year.

Millions of Americans are currently being squeezed by higher petrol and food prices.

"The second quarter rebound is likely to be muted," said Nigel Gault, the chief US economist for IHS Global Insight.

The consumer spending figures were released as part of the second estimate of how the world's biggest economy performed in the first quarter. That, too, disappointed expectations as the Commerce Department left it unchanged at 1.8pc. Economists had pencilled in an upward revision to 2.1pc. (read more)