National Post

U.S. growth weakest in 3 years for Q1 GDP

- Martin Crutsinger

•The U.S. economy turned in the weakest performanc­e in three years in the JanuaryMar­ch quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump’s ambitious growth targets and underscore­s the challenges of accelerati­ng economic expansion.

The gross domestic product, the total output of goods and services, grew by just 0.7 per cent in the first quarter following a gain of 2.1 per cent in the fourth quarter, the Commerce Department reported Friday.

The slowdown primarily reflected slower consumer spending, which grew at a seasonally adjusted annual rate of 0.3 per cent after a growth rate of 3.5 per cent in the fourth quarter. It was the poorest quarterly showing in more than seven years.

Despite the anemic firstquart­er performanc­e, the U.S. economy’ s prospects for the rest of the year appear solid. Growth is expected to be fuelled by a revival in consumer spending, supported by continued strong j ob growth, accelerati­ng wage gains and record stock levels.

Weakness in the first quarter followed by a stronger expansion in the spring has become a pattern in recent years.

The government’s difficulty with seasonal adjustment­s for the first quarter has been a chronic problem and may have shaved as much as one percentage point off growth this year.

The sharp slowdown in consumer spending in the first quarter was attributed to a collection of temporary factors: warmer weather, which shrank spending on heating bills, a drop- off in auto sales after a strong fourth quarter and a delay in sending out tax refund cheques, which also dampened spending.

SalGuatier­i, senior economist at BMO Capital Markets, said he expected consumer and government spending to bounce back, leading to a much stronger second quarter.

“Still, t he report will mark a rough start to the administra­tion’s high hopes of achieving three- per- cent or better growth, not the kind of news it was looking for to cap its first 100 days in office,” Guatieri said in a note to clients.

Averaging the two quarters, they forecast growth of around 2 per cent for the first half of this year. That would be in line with the mediocre performanc­e of the eight- year economic expansion, when growth has averaged just 2.1 per cent, the poorest showing for any recovery in the post- Second World War period.

Trump noted the weak 2016 GDP performanc­e in a tweet Wednesday and contended that “trade deficits hurt the economy very badly.”

For t he first quarter, trade was actually a small positive after a major drag in the fourth quarter.

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