- The Washington Times - Friday, April 30, 2010

The nation’s economy this winter grew for a third straight quarter after suffering through the longest and deepest recession since the Great Depression, the Commerce Department reported Friday morning.

The pace of growth slowed to a still-solid 3.2 percent between January and March from the robust 5.6 percent rate set in the fall, when the economy burst out of recession under the influence of powerful stimulus measures Congress offered to boost sales of cars and homes.

But the winter quarter marked the forceful return of America’s famed consumers, who had pulled back on spending for nearly two years in one of the longest dry spells for the shopping industry in U.S. history. Consumer spending rose by an impressive 3.6 percent, more than double the 1.6 percent pace set in the fourth quarter.

“The recovery is on track,” said Bart Van Ark, economist at the Conference Board. While the pace of growth is down from the fall, “the underlying dynamic is actually healthier and better balanced. More of the rise came from domestic demand,” he said.

The strength in consumer spending last quarter did not reflect the artificial stimulus offered by the government, which is why economists see it as a significant harbinger that the recovery is gaining traction and will be a lasting one. Consumer spending normally fuels about two-thirds of economic activity. The gains were seen in every area, from car and appliance purchases to entertainment and eating out.

Spending on housing construction, by contrast, fell back dramatically by 10.9 percent after having increased by 3.8 percent in the fall in response to a spurt in home sales spawned by the federal tax credit for first-time home buyers. The federal tax credit was temporarily revived this year, and expires again today, but it did not seem to produce the same powerful impact of the original measure.

The report showed that federal stimulus spending waned during the quarter, with federal non-defense spending up by 1.7 percent compared with 8.3 percent in the fall. But spending by state and local governments fell steeply by 3.8 percent — nearly two times the 2.2 percent drop seen in the winter — as the recession took a big bite out of tax revenues and forced significant cutbacks.

“The boost from the stimulus is fading,” and that poses a “strong headwind” that the economy will have to overcome this year for the recovery to continue, said Mr. Van Ark. “There are daunting fiscal problems in the public sector [and] households remain heavily in debt. Unless income and job growth pick up sharply, consumer spending will cool,” he said.

Business spending, by contrast, has shown a durable recovery from recession and contributed significantly to growth in the winter. Spending on computers, equipment and software jumped by 13.4 percent, while a major revival of business spending on inventories continued to power a robust turnaround in manufacturing of cars and other products.

The rise in business restocking alone accounted for more than half the growth posted during the quarter, the department said. But commercial construction continued to be a major drag on the economy, falling by 14 percent.

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