Economy stumbles at start of 2017

WASHINGTON — The economy stumbled at the start of 2017, expanding at its slowest pace in two years in a demonstration of the difficulty President Donald Trump will have in boosting growth to a much stronger sustained level.

Total economic output, also known as gross domestic product, increased at just a 0.7 percent annual rate from January through March as consumer spending posted its worst performance in more than seven years, the Commerce Department said Friday in its first of three official estimates.

The economy grew at a 2.1 percent annual rate in the fourth quarter of last year.

“Growth of less than 1 percent means the wheels are up but the economy’s engines cannot gain any altitude,” said Chris Rupkey, chief financial economist at Mitsubishi UFG Financial Group in New York.

"Trump’s economics team needs to step up their game as the economy is starting out the year in a hole,” he said.

Analysts had forecast a first quarter slowdown, but the 0.7 percent growth was below expectations. It was the worst since the first quarter of 2014, when unusually bad weather in much of the country and a West Coast port dispute caused the economy to contract at a 1.2 percent annual rate.

In unveiling a tax overhaul plan this week that would slash business rates, Treasury Secretary Steven T. Mnuchin said the administration hoped it would lead to sustained growth of 3 percent a year.

But economists said an aging U.S. population and unhealed scars from the Great Recession made that a stretch.

Friday’s data highlighted the difficulties. Although consumer confidence has improved significantly since Trump’s election in November, that didn’t lead Americans to open their wallets after he took office.

Consumer spending grew just 0.3 percent in the first quarter, down from 3.5 percent the previous quarter.

The slowdown was driven by a steep drop-off in purchases of long-lasting durable goods, such as automobiles, appliances and electronics. After an 11.4 percent increase in the fourth quarter, those purchases declined 2.5 percent in the first three months of this year.