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Published: Mon, May 01, 2017
Economy | By Melissa Porter

January/March economic performance worst in 3 years, AP reports

January/March economic performance worst in 3 years, AP reports

This "advance" estimate showed the USA economy with its slowest growth since the first quarter of 2014.

Growth in spending by consumers, which represents over two-thirds of the economic activity in the USA, slowed down to a rate of 0.3% during the first quarter of 2017.

It may be of some solace that the last few years suggest a pattern of growth that picks up in the latter part of the year after a slow first quarter.

The report contains the first official estimates of economic growth under Trump and was coincidentally released on the 99th day of his new administration. Household consumption drives some 70pc of the United States economy, and its very weak expansion, by just 0.3pc in 1Q17, determined the overall pace of growth.

The labor market now is close to full employment and the confidence of consumers is close to highs of multi-years, which suggests that the sharp slowdown mostly created by weather in spending by consumers is likely to be short-lived.

While the slowdown was owed partly to transitory forces and seasonal-adjustment issues, weakness in consumer spending raised concerns about a lagging economy. Investors and Wall Street seem confident that this time, the predictions will finally come true - hence the 11 percent surge in stocks since the election - but some independent economists are wary.

That broadening-out of demand across the US economy should create a solid picture for the consumer in the second quarter, said Sam Bullard, senior economist at Wells Fargo Securities LLC in Charlotte, N.C.

Tax cuts, regulatory relief, trade renegotiations and an unfettered energy sector are needed "to overcome the dismal economy inherited by the Trump administration", said Commerce Secretary Wilbur Ross.

The American economy turned in its weakest performance in three years in the first quarter of 2017 as consumers sharply slowed their spending.

The American Commerce Department reported Friday that the results were below analysts' expectations for 1.1 percent GDP growth, although the figure was only slightly below the 0.8 percent increase in the same quarter of previous year. Higher inflation, which saw the consumer price index averaging 2.5 percent in the first quarter, also hurt spending.

Unseasonably warm weather in the first two months of the year drove down spending on utilities, and delayed tax refunds also put less cash in consumers' pockets, all of which weighed on consumption.

The data are unlikely to dissuade Federal Reserve policy makers from raising interest rates in the coming months. This is weakest performance since the economy contracted by 1.2 percent in the second quarter of 2014. Exports picked up after a bad quarter past year, going from -4.5% to 5.8%, but imports - which drag on GDP - also increased 4.1%, even though that was slower than Q4's 9%. For the first quarter, trade was actually a small positive after a major drag in the fourth quarter.

But some good news is expected.

Investment in home building increased for a second quarter.

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