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US economic growth slows sharply to 0.1% in first quarter | |
(36 minutes later) | |
US economic growth slowed sharply in the first quarter of the year, growing at an annual rate of 0.1%. | US economic growth slowed sharply in the first quarter of the year, growing at an annual rate of 0.1%. |
The rate is the slowest for a year and a large fall on the 2.6% increase in gross domestic product (GDP) in the final quarter of last year. | The rate is the slowest for a year and a large fall on the 2.6% increase in gross domestic product (GDP) in the final quarter of last year. |
An unusually cold and disruptive winter, coupled with tumbling exports, contributed to the decline, the US Commerce Department said. | An unusually cold and disruptive winter, coupled with tumbling exports, contributed to the decline, the US Commerce Department said. |
But it said economic activity already appeared to be bouncing back. | But it said economic activity already appeared to be bouncing back. |
Business investment fell by 2.1%, with spending on equipment plunging by 5.5% at an annual rate compared with a year earlier. | |
Residential construction, which was inevitably hit by the unusually cold winter fell by 5.7% although it was also hit by higher house prices and a shortage of available homes for sale. | |
The US trade trade deficit deficit widened, thanks to a sharp fall in exports which shaved growth by 0.8 percentage points in the first quarter. Businesses also slowed their restocking, with a slowdown in inventory rebuilding reducing growth by nearly 0.6 percentage points. | |
But consumer spending - which drives 70% of growth in the US economy - grew by 3%, although the increase was dominated by a 4.4% rise in spending on services, reflecting higher utility bills during the bitterly cold winter. | |
Rebound | |
A cutback in spending by state and local governments also helped offset a rebound in federal activity after the 16-day partial government shutdown last year. | |
But most economists expect a strong rebound in growth in the April-June quarter. The consensus view is the economy will expand by 3% in the second quarter. | |
Analysts said 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. | |
In fact, many analysts believe 2014 will be the year the recovery from recession finally achieves the robust growth needed to accelerate hiring and reduce still-high unemployment. | |
If the economy rebounds as strongly as they suggest, it will have experienced the fastest annual expansion in the economy in nine years. | |
The last time growth was as strong was in 2005, when GDP grew 3.4%, two years before the nation fell into the worst recession since the 1930s. | |
Unemployment is expected to fall to 6.2% by the end of this year from 6.7% in March. | |
Joel Naroff, chief economist at Naroff Economic Advisors, said he expected job growth to average above 200,000 a month for the rest of the year - starting with the April jobs report, which will be released Friday. | |
"Those are the types of job gains which will generate incomes and consumer confidence going forward," he added. |