Last updated: April 26. 2013 11:56PM - 753 Views

AP FILE PHOTOU.S. consumers earned more and spent more in February, helped by a stronger job market that offset some of the drag from higher taxes, according to the Commerce Department's report Friday.
AP FILE PHOTOU.S. consumers earned more and spent more in February, helped by a stronger job market that offset some of the drag from higher taxes, according to the Commerce Department's report Friday.
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WASHINGTON — After nearly stalling in late 2012, the American economy quickened its pace early this year despite deep government cutbacks. The 2.5 percent annual growth rate in the January-March quarter was fueled by the strongest consumer spending in two years.


The question is: Can it last?


Federal spending cuts, higher Social Security taxes and cautious businesses are likely to weigh on the economy in coming months.


Most economists say they think growth, as measured by the gross domestic product, is slowing in the April-June quarter to an annual rate of about 2 percent. Many predict growth will hover around that subpar level for the rest of the year.


Friday’s Commerce Department report on GDP showed that consumers stepped up spending at an annual rate of 3.2 percent in the January-March quarter — the biggest such jump since the end of 2010. Growth was also helped by businesses, which responded to the greater demand by rebuilding their stockpiles. And home construction rose further.


Government spending sank at a 4.1 percent annual rate, led by another deep cut in defense.


Sal Guatieri, senior economist at BMO Capital Markets, foresees more improvement in the second half of the year.


“The second-half acceleration will be supported by improved household finances, pent-up demand for autos and the ongoing recovery in housing,” Guatieri says. “We are seeing significant housing-related consumer purchases in such areas as furniture.”


GDP is the broadest gauge of the economy’s health. It measures the total output of goods and services produced in the United States, from haircuts and hamburgers to airplanes and automobiles.


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