US econ­omy ekes out 0.2% growth rate in first quar­ter


The U. S. econ­omy skid­ded to a near halt in the first three months of the year, bat­tered by a triple whammy of harsh weather, plung­ing ex­ports and sharp cut­backs in oil and gas drilling.

The over­all econ­omy grew at a barely dis­cernible an­nual rate of 0.2 per­cent in the Jan­uaryMarch quar­ter, the Com­merce Depart­ment re­ported Wed­nes­day. That is the poor­est show­ing in a year and down from 2.2 per­cent growth in the fourth quar­ter.

Plum­met­ing ex­ports pulled growth down by nearly a full per­cent­age point. The cat­e­gory that in­cludes in­vest­ments in oil and gas ex­plo­ration drilling plunged 48.7 per­cent. Con­sumer spend­ing slowed sharply as a se­vere win­ter kept shop­pers home.

The tiny in­crease was much worse than econ­o­mists had ex­pected, but an­a­lysts are still look­ing for a solid re­bound for the rest of the year.

The gov­ern­ment’s first look at over­all eco­nomic growth for the first quar­ter, as mea­sured by the gross do­mes­tic prod­uct, came as the Fed­eral Re­serve wrapped up two days of dis­cus­sions on in­ter­est rate poli­cies. The weak per­for­mance will de­lay any in­ter­est rates in­creases, an­a­lysts said.

“A stalling of U.S. eco­nomic growth at the start of the year rules out any im­mi­nent hik­ing of in­ter­est rates by the Fed,” Chris Wil­liamson, chief econ­o­mist at Markit, wrote in a re­search re­port.

Econ­o­mists are hope­ful that growth will re­bound this spring and sum­mer. They are pre­dict­ing that solid em­ploy­ment gains and ris­ing con­sumer spend­ing will help spur stronger growth.

The Fed is ex­pected to ac­knowl­edge the eco­nomic slow­down in the state­ment it is­sues later Wed­nes­day, while at the same time em­pha­siz­ing its be­lief that the fac­tors re­spon­si­ble were largely tem­po­rary.

At the Fed’s March meet­ing, the cen­tral bank opened the door to a rate in­crease this year by no longer say­ing it would be “pa­tient” in mov­ing to raise in­ter­est rates. While econ­o­mists had thought the change could mean the Fed might hike rates for the first time at the June meet­ing, the view now is that the weaker eco­nomic ac­tiv­ity has pushed off the first rate in­crease un­til at least Septem­ber.

Many econ­o­mists fore­cast growth to re­bound to around 3 per­cent in the cur­rent quar­ter and hold steady in the sec­ond half of the year.

The In­ter­na­tional Mon­e­tary Fund ear­lier this month pro­jected that the U. S. econ­omy would grow 3.1 per­cent this year. While that is a half-point lower than its Jan­uary fore­cast, it would still give the United States the strong­est an­nual growth since 2005, two years be­fore the coun­try fell into the worst re­ces­sion since the 1930s.

The Great Re­ces­sion ended nearly six years ago in June 2009, but growth since the re­cov­ery be­gan has been sub-par, av­er­ag­ing just 2.2 per­cent. De­spite the weak start, an­a­lysts be­lieve 2015 will be the year when growth ac­cel­er­ates to a more re­spectable level.

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