The US economy ground almost to a halt in the first three months of the year amid severe winter weather, official data showed Wednesday.
Gross domestic product increased at an annual rate of 0.1 percent after hitting a 2.6 percent pace in the 2013 fourth quarter, the Commerce Department said.
While analysts had expected some slowing after monthly data suffered under an unusually heavy barrage of winter storms, the slowdown was much worse than the 1.0 percent growth rate expected.
It was the slowest growth since the last quarter in 2012. The world’s largest economy has been losing steam for some time, with full-year GDP growth slowing to 1.9 percent in 2013 from 2.8 percent in 2012.
A World Bank report Tuesday said that China’s rapidly expanding economy could leapfrog the United States this year to take the top ranking.
The Bank said that when comparing output on a purchasing-power basis, the Asian behemoth was breathing down the neck of the US, which has dominated the world economy for over a century.
Driving the first-quarter US growth slump were falling exports and business investment and a larger decrease in inventory investment, the Commerce Department said. Exports dived 7.6 percent after a 9.5 percent 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 3.0 percent after a 3.3 percent rise in the fourth quarter.
Spending fell mainly on nondurable goods, like clothing and food and beverages, as consumers hunkered down inside.
Spending picked up for utilities, with heating bills shooting up during the winter freeze, as well as for healthcare as people signed up for insurance coverage under President Barack Obama’s Affordable Care Act health reform.
The White House said the first quarter was marked by unusually severe winter weather, including record cold temperatures and snowstorms.
“The president will do everything he can either by acting through executive action or by working with Congress to push for steps that would raise growth and accelerate job creation,” said Jason Furman, chairman of Obama’s Council of Economic Advisers.
– Fed stimulus taper looms –
The Commerce Department’s report came as Federal Reserve policy makers met for a second day. The Federal Open Market Committee is widely expected to announce later in the day the central bank will keep its near-zero interest rate unchanged and further reduce stimulus bond purchases.
“Today’s report should not dissuade the Fed from trimming its asset purchases another $10 billion to $45 billion, though it largely rules out the risk of accelerating the pace of tapering,” said Sal Guatieri, senior economist at BMO Capital Markets.
Inflation was slightly more subdued in the first quarter, coming in well below the Fed’s 2.0 percent target. Prices of goods and services bought by consumers rose 1.4 percent in the first quarter, slowing from a 1.5 percent gain in the fourth quarter.
Excluding food and energy, so-called core prices rose 1.4 percent after a 1.8 percent 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 percent. The savings rate fell.
Federal spending rebounded following the partial government shutdown in the fourth quarter.
The report is the first of the department’s three estimates on first-quarter growth.
More recent data has pointed to the economy bouncing back in the current second quarter.
“In short, weak growth and tame inflation, with growth even weaker than expected based on the monthly data,” said Jim O’Sullivan, chief US economist at High Frequency Economics.
But he said the monthly data have also signaled a pickup in growth later in the quarter and as the second quarter began.
“The pattern is consistent with the weakening being due in large part to weather effects and other sources of volatility rather than fundamental deterioration.”