Us first quarter growth weakest in three years as consumer spending falters

US first-quarter growth weakest in three years as consumer spending falters

BREAKING NEWS - The US economy grew at its weakest pace in three years in the first quarter as consumer spending barely increased and businesses invested less on inventories, in a potential setback to President Donald Trump's promise to boost growth.

Gross domestic product increased at a 0.7 per cent annual rate also as the government cut back on defence spending, the Commerce Department said on Friday. That was the weakest performance since the first quarter of 2014.

The economy grew at a 2.1 percent pace in the fourth quarter.

Economists polled by Reuters had forecast GDP rising at a 1.2 percent pace last quarter. The survey was, however, conducted before Thursday's

advance data on the March goods trade deficit and inventories, which saw many economists lowering their first-quarter growth estimates.

The pedestrian first-quarter growth pace is, however, not a true picture of the economy's health. The labour market is near full employment and consumer confidence is near multi-year highs, suggesting that the mostly weather-induced sharp slowdown in consumer spending is probably temporary.

A measure of private domestic demand increased at a 2.2 per cent rate last quarter. The first-quarter GDP tends to underperform because of difficulties with the calculation of data that the government has acknowledged and is working to rectify.

Even without the seasonal quirk and temporary restraints, economists say it would be difficult for Trump to fulfill his pledge to raise annual GDP growth to 4 per cent, without increases in productivity.

Trump is targeting infrastructure spending, tax cuts and deregulation to achieve his goal of faster economic growth.

On Wednesday, the Trump administration proposed a tax plan that includes cutting the corporate income tax rate to 15 per cent from 35 per cent, but offered no details.

Growth in consumer spending, which accounts for more than two-thirds of US economic activity, braked to a 0.3 percent rate in the first quarter.

That was the slowest pace since the fourth quarter of 2009 and followed the fourth quarter's robust 3.5 percent growth rate.

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