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NEW YORK — The American economy sped up in the first quarter of this year, with output expanding at an annualized pace of 2.5 percent, according to a Commerce Department report released Friday.
Much of the acceleration in gross domestic product, though, was likely due to payback from an unusually slow growth at the end of 2012, when the economy grew at an annualized pace of just 0.4 percent. Growth in the fourth quarter had been dragged down by smaller restocking of businesses’ inventories, for example, and in the first quarter businesses made up for this by adding much more to their backroom shelves.
Consumer spending was up too, despite fears that the lapse of the temporary payroll tax holiday at the start of the year would hold back how much consumers were willing to spend. It’s unclear whether consumers will continue to spend as freely in the months ahead, once they start to feel the pinch of this effective tax hike, particularly if wages continue to stagnate.