U.S. Economy Slowed to 0.1 Percent Growth Rate in Q1Posted: April 30, 2014
WASHINGTON (AP) — The U.S. economy slowed drastically in the first three months of the year as a harsh winter exacted a toll on business activity. The sharp slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather.
The economy’s growth slowed to a barely discernible 0.1 percent annual rate in the January-March quarter, the Commerce Department said Wednesday. That was the weakest pace since the end of 2012 and was down from a 2.6 percent growth rate in the October-December quarter.
Consumer spending grew at a 3 percent rate. But that gain was dominated by a 4.4 percent rise in spending on services, reflecting higher utility bills. Spending on goods barely rose. Also dampening growth were a drop in business investment, a rise in the trade deficit and a fall in housing construction.
The scant 0.1 percent increase in the gross domestic product, the country’s total output of goods and services, was well below the 1.1 percent rise economists had been predicting. The last time the quarterly growth rate was so slow was in the final three months of 2012, when it was also 0.1 percent.
A variety of factors held back growth. Business investment fell at a 2.1 percent rate, with spending on equipment plunging at a 5.5 percent annual rate. Residential construction fell at a 5.7 percent rate. Housing was hit by winter weather and by other factors such as higher home prices and a shortage of available houses.
A widening of the trade deficit, thanks to a sharp fall in exports, shaved growth by 0.8 percentage point in the first quarter. Businesses also slowed their restocking, with a slowdown in inventory rebuilding reducing growth by nearly 0.6 percentage point.
Also holding back growth: A cutback in spending by state and local governments. That pullback offset a rebound in federal activity after the 16-day partial government shutdown last year.
Economists say most of the factors that held back growth in the first quarter have already begun to reverse. Most expect a strong rebound in growth in the April-June quarter. The consensus view is the economy will expand by 3 percent in the second quarter.
Analysts say the stronger growth will endure through the rest of the year as the economy derives help from improved job growth, rising consumer spending and a rebound in business investment….(read more)
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