MercoPress. South Atlantic News Agency

US economy expanded at a 1.9% annual pace in the first quarter

The Federal Reserve forecasted the US economy decline was ‘temporary’

The United States economy grew at a 1.9% pace in the first quarter marking the start of what Federal Reserve policy makers anticipate is a temporary slowdown in growth.

The revised rise in GDP follows a 3.1% gain in the prior quarter, US Commerce Department figures showed Friday in Washington. The government last month estimated first-quarter growth at 1.8%. The figures also showed inflation climbed more than previously calculated.

The jump in commodity prices and the shortage of auto parts stemming from the disaster in Japan earlier this year that have also restrained growth this quarter are showing signs of improving. Fed officials, who lowered their forecasts for growth and employment this year and next, this week maintained record stimulus to underpin the recovery.

The first-quarter revision reflected a smaller trade deficit and a bigger increase in inventories than previously reported. A 4.2% drop in spending by state and local government agencies that was larger than last estimated and the biggest drop since 1981 held back the advance in GDP.

Orders for durable goods climbed more than forecast in May after slumping the prior month, easing concern manufacturing will share in an extended US growth slowdown, other figures from the Commerce Department showed.

Bookings for equipment meant to last at least three years rose 1.9% after a 2.7% decline the prior month that was less than originally reported. Demand for non-military capital equipment also beat expectations after revised April readings showed a smaller decline than previously reported.

Friday’s GDP report showed consumer spending rose at a 2.2% annual pace, the same as previously reported. The 4% gain in the fourth quarter was the biggest since the end of 2006.

The US central bank said the economy will expand 2.7% to 2.9% this year, down from forecasts ranging from 3.1% to 3.3% in April. The revised outlook this week was the second time this year that Fed officials lowered their forecasts for growth.