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Financial News: U.S. Economic Growth Slows More Than Expected In

U.S. Economic Growth Slows More Than Expected In Q1

04/28/2017 - 09:10:00 (RTTNews)

(RTTNews) - Economic growth in the U.S. slowed by more than anticipated in the first three months of 2017, according to a report released by the Commerce Department on Friday.

The Commerce Department said gross domestic product increased by 0.7 percent in the first quarter after jumping by 2.1 percent in the fourth quarter. Economists had expected GDP to climb by 1.2 percent.

The weaker than expected increase in GDP in the first quarter represents the worst performance since a 1.2 percent decline in the first quarter of 2014.

However, Paul Ashworth, Chief U.S. Economist at Capital Economics, said the weak GDP growth won't necessarily stop the Federal Reserve from hiking interest rates again in June.

"In recent years there is a well-established pattern of GDP growth disappointing in the first quarter and then rallying over the remaining three quarters," Ashworth said.

"Indeed, since 2010, the average for first-quarter growth is only 0.9%, compared with 2.4% in each of the other three quarters," he added. "Fed officials are well aware of this potential residual seasonality.

The slowdown in the pace of GDP growth came as consumer spending rose by just 0.3 percent in the first quarter after surging up by 3.5 percent in the fourth quarter.

Ashworth said consumer spending was held down by a pullback in motor vehicle sales from a near-record high and unseasonably warm winter weather, which depressed utilities spending.

The Commerce Department said the deceleration in GDP growth also reflected downturns in private inventory investment and state and local government spending.

An upturn in exports and accelerations in both non-residential and residential fixed investment helped to limit the downside.

Meanwhile, a reading on core consumer prices, which exclude food and energy prices, showed that the pace of price growth accelerated to 2.0 percent in the first quarter from 1.3 percent in the fourth quarter.

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