Texarkana Gazette

Economic stumble

Growth rate worst in two years, underscori­ng Trump’s challenge

- By Jim Puzzangher­a

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.

Commerce Secretary Wilbur Ross said the report showed that the economy needed the tax cuts and regulatory reductions promised by Trump.

“Business and consumer sentiment is strong, but both must be released from the regulatory and tax shackles constraini­ng economic growth,” Ross 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.

The last time consumer spending was weaker was the fourth quarter of 2009, just six months after the Great Recession officially ended.

Overall growth also took a hit from a decline in spending by federal, state and local government­s. And unseasonab­ly warm weather appeared to cause spending on utilities to drop.

“A cold winter can lead to delays in constructi­on activities. A warm one, as was the case this year, can produce lower utility bills,” said Brian Schaitkin, senior economist at the Conference Board.

“Sky-high consumer confidence and rising wages suggest that spending should bounce back quickly during the rest of the year, driving the economy to overall growth of around 2 percent in 2017, in line with long-term trends,” he said.

 ?? Associated Press ?? People walk near the Comcast Innovation and Technology Center under constructi­on, middle, and the Comcast Center, center right, on March 29 in Philadelph­ia. On Friday, the Commerce Department issued the first of three estimates of how the U.S. economy...
Associated Press People walk near the Comcast Innovation and Technology Center under constructi­on, middle, and the Comcast Center, center right, on March 29 in Philadelph­ia. On Friday, the Commerce Department issued the first of three estimates of how the U.S. economy...

Newspapers in English

Newspapers from United States