The US economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result repeats a pattern that has characterized the recovery: lacklustre beginnings to the year.
The Commerce Department says the gross domestic product, the total output of goods and services, grew by just 0.7% in the first quarter following a gain of 2.1% in the fourth quarter.
The slowdown primarily reflected slower consumer spending, which grew by just 0.3% after a 3.5% gain in the fourth quarter. It was the poorest showing in more than seven years. Analysts blame in part the unusually warm winter, which meant less spending on utility bills.
Economists believe the slowdown will be temporary. They forecast GDP growth will rebound to 3% or better in the current quarter.
Averaging the two quarters, they forecast growth of around 2% for the first half of this year. That would be in line with the mediocre performance of the eight-year economic expansion, when growth has averaged just 2.1%, the poorest showing for any recovery in the post-war period.
Donald Trump repeatedly attacked the weak GDP rates during the campaign as an example of the Obama administration’s failed economic policies. He said his program of tax cuts for individuals and businesses, deregulation and tougher enforcement of trade agreements would double growth to 4% or better.
“There are a lot of tailwinds behind consumers going into the spring, including low unemployment, better wage growth, high consumer confidence and record stock prices,” said Mark Zandi, chief economist at Moody’s Analytics.