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Below-par US growth keeps the pressure on markets

Published on NewsOK Modified: April 26, 2013 at 12:14 pm •  Published: April 26, 2013
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LONDON (AP) — Markets in Europe ended the week with a whimper after a surprisingly big fall in Japanese consumer prices and lower-than-expected first-quarter U.S. economic growth.

The news that the U.S. economy grew by only 2.5 percent on an annualized basis during the first three months of the year was a disappointment as the consensus in the markets was for a rise of around 3 percent compared with the previous quarter's 0.4 percent.

After a run of disappointing U.S. economic news, the smaller-than-expected increase is likely to fuel concerns about the state of the world's largest economy. However, the fact that consumption held up and the fall was largely due to weaker government spending tempered the disappointment.

"The economy accelerated in the first quarter, but growth was still somewhat disappointing relative to expectations," said Jim Baird, chief investment officer at Plante Moran Financial Advisors. "If there is good news to be found, it's that the consumer sector charged forward, shrugging off higher taxes and a sharp decline in disposable personal income to ratchet up spending."

In Europe, the FTSE 100 index of leading British shares closed Friday down 0.25 percent to 6,426 while Germany's DAX fell 0.23 percent to 7,814. The CAC-40 in France was 0.8 percent lower at 3,810.

In the U.S., the Dow Jones industrial average was more or less unchanged at 14,708 while the broader S&P 500 index fell 0.3 percent to 1,580.

The dollar was largely unaffected by the U.S. GDP figures and the euro was 0.2 percent higher at $1.3028.

Friday's session had already been dented by the news that prices in Japan are falling at their fastest rate in two years. Deflation is considered a bad as it can weigh on economic activity by giving consumers the incentive to hold off making purchases and by keeping a lid on wages. It also raises the relative value of a country's debt and for a country like Japan that's another problem.

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