partlycloudy
Saturday August 1st, 2015 8:15PM

US economy slowed to 0.1 percent growth rate in Q1

By The Associated Press
WASHINGTON (AP) -- The U.S. economy slowed sharply in the first three months of the year as a harsh winter exacted a toll on business activity. The slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather.

Growth slowed to a barely discernible 0.1 percent annual rate in the January-March quarter, the Commerce Department said Wednesday. That was the weakest pace since the end of 2012 and was down from a 2.6 percent rate in the previous quarter.

Many economists said the government's first estimate of growth in the January-March quarter was skewed by weak figures early in the quarter. They noted that several sectors - from retail sales to manufacturing output - rebounded in March. That strength should provide momentum for the rest of the year.

And on Friday, economists expect the government to report a solid 200,000-plus job gain for April.

"While quarter one was weak, many measures of sentiment and output improved in March and April, suggesting that the quarter ended better than it began," said Dan Greenhaus, chief investment strategist at global financial services firm BTIG.

Still, the anemic growth last quarter is surely a topic for discussion at the Federal Reserve's latest policy meeting, which ends Wednesday afternoon.

In its report, the government said consumer spending grew at a 3 percent annual rate last quarter. But that gain was dominated by a 4.4 percent rise in spending on services, reflecting higher utility bills and an expansion in health care spending from provisions of the Affordable Care Act. Spending on goods barely rose. Also dampening growth were a drop in business investment, a rise in the trade deficit and a fall in housing construction.

The scant 0.1 percent growth rate in the gross domestic product, the country's total output of goods and services, was well below the 1.1 percent rise economists had predicted. The last time a quarterly growth rate was so slow was in the final three months of 2012, when it was also 0.1 percent.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he expects growth to rebound to a 3 percent annual rate in the current April-June quarter. Other economists have made similar forecasts.

A variety of factors held back first-quarter growth. Business investment fell at a 2.1 percent rate, with spending on equipment plunging at a 5.5 percent annual rate. Residential construction fell at a 5.7 percent rate. Housing was hit by winter weather and by other factors such as higher home prices and a shortage of available houses.

A widening of the trade deficit, thanks to a sharp fall in exports, shaved growth by 0.8 percentage point in the first quarter. Businesses also slowed their restocking, with a slowdown in inventory rebuilding reducing growth by nearly 0.6 percentage point.

Consumer spending on goods rose just 0.4 percent, the smallest gain in nearly three years. That made for a tough quarter for The Legacy Companies, a Fort Lauderdale, Fla.-based company that makes blenders, juicers and other kitchen supplies.

Neal Asbury, the CEO, said his U.S. sales fell 5 percent in the first quarter. Retailers such as Macy's, Bed Bath and Beyond and Kohl's had stocked up on his company's wares in anticipation of solid first-quarter sales, as in previous years. This year, "that didn't happen to the degree people expected it to happen."

But in recent weeks, retailers have started to clear out their excess supplies, Asbury said. That could boost his company's sales in future months once retailers need to restock.

"We seem to be through the worst part of it," he said.

Also holding back growth: Less spending by state and local governments. That pullback offset a rebound in federal activity.

Economists say most of the factors that depressed growth in the first quarter have already begun to reverse. Most say stronger growth should endure through the rest of the year as the economy derives help from job gains, rising consumer spending and a rebound in business investment.

In fact, many analysts believe 2014 will be the year the recovery from the Great Recession finally achieves the robust growth that's needed to accelerate hiring and reduce still-high unemployment. Many analysts think annual economic growth will remain around 3 percent for the rest of the year.

If that proves accurate, the economy will have produced the fastest annual expansion in the gross domestic product, the broadest gauge of the economy's health, in nine years. The last time growth was so strong was in 2005, when GDP grew 3.4 percent, two years before the nation fell into the worst recession since the 1930s.

A group of economists surveyed this month by The Associated Press said they expected unemployment to fall to 6.2 percent by the end of this year from 6.7 percent in March.

One reason for the optimism is that a drag on growth last year from higher taxes and deep federal spending cuts has been diminishing. A congressional budget truce has also lifted any imminent threat of another government shutdown. As a result, businesses may find it easier to commit to investments to modernize and expand production facilities and boost hiring.

"Growth came to a grinding halt early this year, but with consumers spending and payrolls expanding, the future looks a lot brighter," said Joel Naroff, chief economist at Naroff Economic Advisors.

---
© Copyright 2015 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Judge denies motions to move, delay Tsarnaev trial
Lawyers for Boston Marathon bombing suspect Dzhokhar Tsarnaev asked a federal appeals court Wednesday to overturn a judge's decision to not move his upcoming trial out of state.
10:02PM ( 7 months ago )
High court to adopt electronic filing of cases
The Supreme Court is belatedly developing an electronic filing system similar to those used in courts around the country, Chief Justice John Roberts said Wednesday in his annual end-of-year report.
7:57PM ( 7 months ago )
Storm brings snow, cold to West for New Year's
A blustery winter storm dumped snow and ice across the West on Wednesday, making driving treacherous in the mountains from California to the Rockies and forcing residents and party-goers in some usually sun-soaked cities to bundle up for a frosty New Year's.
5:19PM ( 7 months ago )
U.S. News
State DOT awards $48M contract for NE Ga. road project
The state Department of Transportation has awarded a $47.8 million contract for nine miles of work on a northeast Georgia road.
9:37AM ( 7 months ago )
Business News
Grass fire impacts rush hour traffic on 985
Rush hour traffic on I-985 was slowed by a grass fire Wednesay afternoon with one lane closed while firefighters fought the blaze.
10:19PM ( 7 months ago )
Hall County conviction, sentencing to be reviewed by SCOGA
The State Supreme Court has agreed to hear the appeal of a Hall County man when they reconvene in January.
2:37PM ( 7 months ago )
Maysville man dies from Banks County wreck
The Georgia State Patrol reports that alcohol and/or drugs were factors a single-vehicle wreck that claimed the life of a Maysville man in Banks County Tuesday night.
11:07AM ( 7 months ago )
Local/State News
Atlanta airport again leads in number of guns found in bags
Atlanta's airport once again leads the nation in the number of guns found in carry-on bags.
By The Associated Press
6:49PM ( 1 hour ago )
Judge blocks release of new recordings by anti-abortion group
SAN FRANCISCO (AP) — A federal judge on Friday blocked the release of any recordings made at meetings of an abortion providers' association by an anti-abortion group that previously revealed secretly...
8:30AM ( 11 hours ago )
Firefighter killed battling blaze in California forest
ALTURAS, Calif. (AP) — A U.S. Forest Service firefighter from South Dakota has been killed battling one of more than a dozen wildfires raging across California, Forest Service officials said Friday ni...
12:31AM ( 19 hours ago )
'Gut-wrenching' decision: Search for teens suspended
OPA-LOCKA, Fla. (AP) — After hundreds of rescue workers fanned out across a massive swath of the Atlantic for a full week, the Coast Guard's search for two teenage fishermen ended Friday, a heart-rend...
10:42PM ( 21 hours ago )
Clinton releases tax, health records on busy Friday
WASHINGTON (AP) — Hillary Rodham Clinton and her husband paid close to $44 million in federal taxes since 2007 and she is in "excellent physical condition" — two facts that emerged Friday in a flood o...
7:59PM ( 1 day ago )