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Surging stock prices and steady home-price increases have also allowed Americans to regain the $16 trillion in wealth they lost to the Great Recession. Higher wealth tends to embolden people to spend more. Some economists have said the increase in home prices alone could boost consumer spending enough to offset a Social Security tax increase. The weakest area of the economy continues to be government spending, which fell for the 10th time in the last 11 quarters. The 4.9 percent rate of decline was even larger than first estimated, reflecting further drops in defense spending and weaker activity at the state and local level. Economists were puzzled by the steeper decline at the state and local level. Spending among those governments fell in the first quarter at an annual rate of 2.4 percent
-- double the initial estimate and the biggest quarterly drop in two years. And with the federal government furloughing workers and trimming other spending to meet the mandates of the sequester, government activity will be a drag on growth for the rest of the year. "The fiscal squeeze will continue for the rest of the year," said Paul Ashworth, chief U.S. economist at Capital Economics. Still, Ashworth doesn't see economic growth slowing very much in the current quarter. He projects growth in the April-June quarter to come in at a rate between 2 percent and 2.5 percent. The housing recovery continued to add to growth at the start of the year. Home construction, one of the economy's top performers, grew at an annual rate of 12.1 percent in the first quarter, its third consecutive quarter of double-digit growth. Businesses, however, reduced the pace of their investment in equipment and computer software. That slowed to a growth rate of 4.6 percent in the first quarter, down from growth of 11.8 percent in the fourth quarter.
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