The Commerce Department reported in their revised report of US GDP figures for the 1st quarter in 2013 that the U.S. economy grew at 2.4 percent annualized rate, revised from 2.5 percent as cutbacks in government spending pared back some of the recent gains in consumer spending.
Government spending fell by 4.9 percent instead of 4.1 percent with the majority of the decline coming from military spending.
Consumer spending which accounts for between 60-70 percent of the U.S. economy was revised to 3.4 percent from 3.2 percent, the fast rate in 2 years.
Residential construction grew at a 12.1 percent annualized rate, revised from 12.6 percent.
Many economists are expecting U.S. GDP to decline in the 2nd quarter amid some economic changes in government fiscal policies related to across the board sequester spending cuts along with increased taxes for most Americans such as the payroll tax before growth picks up in the second half of 2013 as Americans adjust to those fiscal policy changes.
U.S. Jobless Claims
The Labor Department reported that 354,000 jobless claims were filed last week which is 10,000 higher than the jobless claims in the previous week.
The results of these economic data points, especially around labor and industry, are expected to send a signal to Fed members at the Federal Reserve concerning the closely watched decision about whether the Fed should taper its $85 billion a month bond-buying program which comes on the heels of an improving trend of U.S. economic data and rising yields on the 10 year Treasury that recently saw a 13 month high at 2.24 percent.
The next major employment report which reveals the monthly unemployment level and participation rates for May won’t be released until a week from Friday on June 7th.
Sharon Stark, Managing Director and Fixed Income Strategist at DA Davidson & Co, said on CNBC’s Bond Report that she believes that the market will see a see-saw type of pattern with the 10 yr. Treasury from the 2.20’s to slightly below 2 percent.
“The markets are still uncertain about the strength of the U.S. recovery. They know that its recovering but the question is: Is it recovering enough for the Fed to pullback with its bond purchases?” Stark questioned.