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Forecasters Say US Economy Still Needs Recovery Time

Forecasters had anticipated that the US economy would grow at a projected 3 percent rate, but have since rescinded that notion. Today the Bureau of Economic Analysis released its advanced projections, much to the dismay of investors abroad. US economic output only increased at 2.5 percent, half a point shy of previous predictions. All said and done: growth is taking place at a snail’s pace as the economy still hinges on recovery post recession woes.

Private investments did not increase by very much, with most growth attributed to personal consumption and the accumulation of inventory. But, experts say, inventory growth matters little during the first quarter, and is mostly related to 2012 efforts. However, personal accumulation rang a bell, as this is the largest it’s been since the start of 2010.

Personal income growth dropped more than 5 percent overall, and the personal savings rate dropped from more than 4 percent to 2.6 percent. Many speculate that these changes are directly correlated to the tax increases and the government cutbacks on spending this year.

“With fiscal tightening weighing on the spring and summer quarters, we expect weaker growth ahead,” Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisers, said in a note to clients before the report. “We have seen good quarters before, but what counts is sustainability, and on that score we are deeply unconvinced.”

Some Blame the Feds

Justin Wolfers, an economics and public policy professor at the University of Michigan, says it’s really mostly the government’s fault, placing the blame squarely on their shoulders.

“The bigger picture is that we have a fledgling recovery which needs help, but isn’t getting it,” he said.

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