US economy recovering but isn't yet accelerating

Associated Press Modified: May 3, 2012 at 5:00 pm •  Published: May 3, 2012
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Still, spending on home construction and renovations rose from January through March by the most in nearly two years. And housing investment, led by apartment construction, is expected to contribute to economic growth this year for the first time since 2005.

The warm winter may also have led more people to buy earlier in the year, essentially stealing sales from March. Reduced prices, record-low mortgage rates, higher rents and the improving job market appear to be emboldening would-be buyers. Many seem to have concluded that prices won't drop much further, if at all.

And builders are laying plans to construct more homes in 2012 than at any other point in the past 3½ years.

— CONSUMERS

Americans have proved surprisingly willing to spend in the face of a wobbly economy. In the first three months of the year, consumer spending grew at an annual pace of 2.9 percent, the fastest in more than a year.

Some economists doubt that consumers can keep it up. They probably can't afford to. Americans' after-tax income in the first three months rose just 0.6 percent from a year earlier. That was the skimpiest pay increase in two years. People spent more, in part, because they saved less. Economists worry that people won't keep spending more unless their income grows.

On Thursday, big retailers including Costco, Macy's and Target, reported that sales last month came in below expectations.

— CORPORATE PROFITS

U.S. companies earned more money than analysts expected from January through March. They're beating Wall Street estimates at the best rate in more than a decade. Improved earnings have propelled the Dow Jones industrial average up nearly 4 percent since April 10.

U.S. corporations excluding banks and other financial firms are sitting on more than $2.2 trillion in cash, up from $1.7 trillion in 2009. That surplus means they can afford to expand and hire whenever they're confident enough.

— MANUFACTURING

Manufacturing has provided much of the fuel for the U.S. recovery since the recession ended roughly three years ago. American manufacturing expanded last month at the fastest pace in 10 months. New orders rose to the highest level in a year, a signal of more production in coming months. Export orders also rose, despite worries that weaker economies in Europe and China could hold back U.S. exports.

And the busier factories are hiring. Manufacturers added 120,000 jobs a month through March this year, their fastest three-month pace since 1997.

But the economists surveyed by the AP think manufacturers will fill jobs more slowly the rest of the year. If so, that could weaken overall job growth.



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