Washington Post | Saturday, May 1, 2010
The slow-motion economic recovery has continued in the early months of 2010, according to new data that both affirm that an expansion is solidly in place and underscore that it is likely to remain sluggish. Gross domestic product, the broadest measure of economic activity, rose at a 3.2 percent annual rate in the first three months of the year, the government said Friday. That was the third straight quarter of increase, driven by a rise in spending by American consumers and increased business investment. The stock market fell sharply on Friday, with the ‘Standard & Poor’s’ 500 index down 1.7 percent on the weaker-than-expected GDP report and continuing uncertainty surrounding a potential bailout for Greece.
The details of the GDP report paint a picture of an economic recovery that is well underway and a nation that is unlikely to slide back into recession in 2010. Personal consumption increased at a pace of 3.6 percent, while investment in business equipment and software rose at a 13.4 percent rate. Those gains bode well in that they show both consumers and corporate America starting to loosen their purse strings. "Put together the rise in consumer spending and what is happening on the corporate side, and we’re starting to make the transition from a government-driven expansion to a private-sector recovery," said Robert Dye, senior economist at PNC Financial Services Group. "That’s a very important transition for us to make over the next few months."
Friday’s data showed the limits of that expansion, however, and gave some reasons to be concerned about its sustainability. A rise in business inventories — companies increased the value of goods on their warehouse and store shelves by $31 billion in the quarter — contributed 1.6 percentage points to growth but is likely to