US growth clipped by austerity

WASHINGTON spending cuts have pushed US economic growth down over the first quarter, with a rise of 2.4 per cent confirmed by statistics released yesterday.

The number of jobless Americans claiming unemployment benefits rose, up by 63,000 to 2.79m in the last week, but down from the 3.06m people who were receiving the payments this time last year.

Government spending was sharply curtailed by a series of automatic budget cuts called the sequester. State expenditure plummeted by 4.9 per cent in comparison to the same point in 2012. Initial estimates suggested a decline of only 4.1 per cent.

The private sector expanded more than the headline figure, at 3.6 per cent. Though the overall rate of growth was slightly slower than initially expected, this was almost entirely accounted for by falling government spending.

There was a 2.2 per cent fall in corporate profits in the first quarter, which still marked a 3.6 per cent improvement on the first three months of 2012.

The dollar fell slightly against most currencies following the release, declining by 0.7 per cent against sterling over the day, down from £0.66 toward £0.65.

Paul Ashworth, chief US economist at Capital Economics said that many changes balanced each other out, and there were notable improvements on the previous year, adding: “none of this really changes our forecast for second-quarter GDP growth, which we currently expect to be between two and 2.5 per cent”.