WASHINGTON – The U.S. economy slowed to a crawl in the first three months of the year as a harsh winter exacted a toll on business activity. The slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather.
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 rate in the previous quarter.
Many economists said the government’s first estimate of growth in the January-March quarter was skewed by weak figures early in the quarter. They noted that several sectors – from retail sales to manufacturing output – rebounded in March. That strength should provide momentum for the rest of the year.
Economists expect the government Friday to report a solid 200,000-plus job gain for April.
While quarter one was weak, many measures of sentiment and output improved in March and April, suggesting that the quarter ended better than it began, said Dan Greenhaus, chief investment strategist at global financial services firm BTIG.
Still, the anemic growth last quarter was surely a topic for discussion at the Federal Reserve’s latest policy meeting, which ended Wednesday.
In its report, the government said consumer spending grew at a 3 percent annual rate last quarter. But that gain was dominated by a 4.4 percent rise in spending on services, reflecting higher utility bills and an expansion in health care spending from provisions of the Affordable Care Act.
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 growth rate in the gross domestic product, the country’s total output of goods and services, was well below the 1.1 percent rise that economists had predicted. The last time a quarterly growth rate was so slow was in the final three months of 2012, when it was also 0.1 percent.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he expects growth to rebound to a 3 percent annual rate in the current April-June quarter. Other economists have made similar forecasts.