US economy slows to just 0.1% growth in first quarter

Wednesday 30 April 2014 18.17
US consumer spending slows down in first three months of 2014
US consumer spending slows down in first three months of 2014

The US economy ground almost to a halt in the first three months of the year amid severe winter weather, official data showed today. 

US gross domestic product increased at an annual rate of 0.1% after hitting a 2.6% pace in the 2013 fourth quarter, the country's Commerce Department said. 

It was the slowest growth since the last quarter in 2012. The slowdown was much sharper than expected, with most analysts having forecast a 1% growth rate.

Driving the slump were falling US exports and business investment and a larger decrease in inventory investment. Exports dived 7.6% after a 9.5% rise in the fourth quarter.

Another key factor was a modest slowdown in consumer spending, which accounts for about two-thirds of US economic activity. Consumer spending increased 3%, slowing from a 3.3% rise in the fourth quarter.

Spending fell mainly on non-durable goods, like clothing and food and beverages, while it picked up for utilities and healthcare.

The Commerce Department did not comment on the reasons behind the slowdown, but the Federal Reserve has said that bad winter weather in much of the country was partly to blame.

Inflation was slightly more subdued in the first quarter, coming in well below the Fed's 2% target. Prices of goods and services bought by consumers rose 1.4% in the first quarter, slowing from a 1.5% gain in the fourth quarter.

Excluding food and energy, so-called core prices rose 1.4% after a 1.8% gain in the prior quarter. 

A bright spot was higher personal income that offered hope for stronger consumer spending in the second quarter. The increase in disposable personal income - income adjusted for inflation and taxes - more than doubled to 1.9%. The savings rate fell.

The report is the first of three estimates on growth. Most analysts expect the economy will bounce back in the current second quarter.