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Economy showing growth

In this April 24, 2012, file photo, women and girls carry purchases on the Third Street Promenade in Santa Monica, Calif. The Commerce Department said Friday, April 27, 2012, that the economy expanded at an annual rate of 2.2 percent in the January-March
In this April 24, 2012, file photo, women and girls carry purchases on the Third Street Promenade in Santa Monica, Calif. The Commerce Department said Friday, April 27, 2012, that the economy expanded at an annual rate of 2.2 percent in the January-March quarter, compared with a 3 percent gain in the final quarter of 2011. Consumers spent at the fastest pace in more than a year. (AP Photo/Reed Saxon, File)
Associated Press

WASHINGTON — Don't panic yet. The government reported Friday that the economy got off to a tepid start this year, but that doesn't foreshadow a repeat of the near-standstill that happened in 2011.

"The economy is firmly on a growth trajectory," said Sung Won Sohn, an economics professor at California State University's Smith School of Business. "The first-quarter slowdown will be temporary."

Still, the January-March report was discouraging.

Economists had expected gross domestic product — the broadest gauge of economic output — to expand at a 2.5 percent annual rate for the first three months of the year. Instead, the Commerce Department said it was 2.2 percent, mainly because of government budget-cutting and a slowdown in business investment.

And some of the January-March growth, meager as it was, probably came at the expense of the current quarter. An unseasonably warm winter pulled car buyers into showrooms earlier than usual.

The same was true for housing construction. That's one reason it jumped at a 19 percent pace from January through March.

Economists doubt consumers can keep spending as freely as they did in the first three months of this year: an annual pace that was 2.9 percent faster than in the previous quarter and the fastest in more than a year. They probably can't afford to. Americans' after-tax income rose just 0.6 percent in the first three months compared with a year earlier. That was the puniest pay increase in two years.

People spent more in part because they socked away less. The savings rate fell to 3.9 percent of after-tax income. That was down from 4.5 percent. Economists worry that people won't keep spending more unless their income grows.