Icy weather in US keeps shoppers at home and economy languishing

Stuck fast: A ship is

frozen in Lake Superior, Wisconsin.

According to the National Oceanic and Atmospheric Administration Great Lakes Environmental Research Laboratory,

by mid-February about 94 per cent of Lake Superior was

covered with ice.

Photo: REUTERS The American economy grew at a slower pace than originally thought in the final quarter of last year, raising the prospect that the Federal Reserve may temper the reduction of its bond-buying stimulus programme.

Part of the problem has been the unusually icy winter weather, which has kept shoppers at home and hampered economic activity.

Economists are also concerned, however, about possible underlying weakness in the country’s recovery.

The US Commerce Bureau revised estimates for fourth-quarter growth down from an initial 3.2 per cent to 2.4 per cent, because of weaker spending, slowing investment in inventories and softer exports.

The figure was worse than the 2.5 per cent expected and significantly lower than the 4.1 per cent growth in the third quarter.

Federal Reserve head Janet Yellen said last week that severe weather probably played a role in the recent run of tepid data, but she hinted that the central bank may reconsider its tapering of bond purchases if there were to be a ‘‘significant change’’ in the economic outlook because of weaker fundamentals.

Consumer spending, which accounts for more than two thirds of America’s economic activity, was responsible for a large part of the revision. Even so, the 2.6 per cent growth in spending in the fourth quarter was the highest reading of 2013, suggesting general resilience. This was underscored by separate figures on consumer sentiment for February, with a reading of 81.6 beating both January’s 81.2 and the median forecast of 81.3 among economists polled by Reuters.

TD Securities deputy chief economist Millan Mulraine said: ‘‘That suggests some stabilisation in economic activity. It bolsters the current narrative that the slowing in activity has been the result of the unseasonably cold winter conditions, which we expect to reverse in coming weeks.’’