NEW YORK, April 27 (Reuters Breakingviews) - The American consumer held the U.S. economy afloat in the first quarter, driving an annualized GDP growth rate of 1.1% - less than expected though still enough to avoid recession. But the signs that shoppers are getting tired are already in plain sight.
Consumption added 2.5 percentage points to GDP growth, which is close to levels seen in the past. That was almost entirely offset, however, by businesses cutting back on inventory. And it’s not hard to see why companies might want to reduce their stockpiles. Americans’ spending at retailers and restaurants shrank in February and March, the Census Bureau reported on Monday.
That restraint will probably continue. Disposable income grew through the quarter at the slowest pace since June 2020, according to Bank of America, as workers’ raises shrank. Layoffs are also picking up, with filings for unemployment benefits edging higher through April, according to the Labor Department.
Spending by American households counts for 70% of GDP – meaning shoppers effectively decide whether the U.S. economy is headed for recession or recovery. That’s a heavy burden, and it’s getting heavier as the year goes on. (By Ben Winck)
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