The U.S. economy grew 2% after inflation in the first quarter, estimates Barclays analyst Michael Gapen, who had forecast 3.5%. However, he has raised his second-quarter forecast a half point to 3.5%.
Two factors behind the slow winter were bad weather and rising inflation, which discouraged consumer spending. The bad weather led to sharp drops in construction, which should pick up in the spring.
Meanwhile, Gapen says, “industrial production growth, payroll growth, and the unemployment rate have all been moving in a way that is consistent with strong, not weak, economic growth.” Car sales were increasing, as well.
Gapen sees more inflation on the horizon: He said that the government moves to tighter money around the world did not succeed in dampening pressure on commodity prices and that pressure on prices other than for energy and food are building among both U.S. producers and importers. Still, he expects that the Federal Reserve board will vote to complete the $600 billion in Treasury purchases by the end of the second quarter.
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