Slow spending drags on U.S. economy

WASHINGTON, May 1 (UPI) -- Economists looking at consumer spending say the powerful economic indicator points to a slow recovery for the U.S. economy.

The Commerce Department said Wednesday the economy grew by 0.6 percent for the second consecutive quarter, just a few ticks above a contraction.

Consumer spending, which grew by 1 percent, is responsible for about two-thirds of the country's economic activity.

Analysts say the slow spending contributes to job layoffs, which further slows recovery.

With a credit crisis and home equity in decline, the tight spending "is not a fluke or a technical quirk," John Silvia, chief economist at Wachovia in Charlotte, N.C., told The New York Times Thursday. "It's fundamental. Real disposable income has been squeezed."

Spending declined in the first quarter across a wide range of products including large durable goods and food, indicating a drift toward thrift, the Times reported.

Wages have also declined relative to inflation by 0.6 percent over the past three months, the Times reported.

"A very significant slowdown in the economy has caused a lot of pain … that's a done deal," Jared Bernstein at the Economic Institute in Washington told the Times.