The economy expanded less than previously estimated this first quarter as slower inventory building and cutbacks in government spending overshadowed the biggest gain in consumer purchases since 2010. However, strong consumer spending, further housing market progress and jobs gains will allow Americans to sustain their finances as the fallout from federal budget cuts subsides. ‚??The economic outlook is still favorable,‚?Ě said Millan Mulraine, an economist at TD Securities USA LLC in New York, who correctly forecast GDP. ‚??It‚??s still fairly robust growth driven by consumer spending. We expect an acceleration in the second half as the economy moves beyond the current soft patch.‚?Ě
The dollar fell to a three-week low against the euro on weak economic data, which has dampened expectations that the Federal Reserve will reduce its monetary stimulus soon. Further, analysts have suggested that weaker data could reinforce expectations that the Fed needs a lot of monetary stimulus, but Fed Chairman Ben Bernanke has recently argued that the stimulus needs to be tapered down. “We need two things, according to Bernanke, to consider tapering. That is, we need stronger data and we need more confidence of sustained improvement. And today’s data simply does not support that conclusion,” said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.