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

•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.