- REUTERS/Jim Young
The US economy slowed more than expected in the first quarter.
An advance estimate of gross-domestic-product growth on Thursday was 0.5%, the weakest pace in two years and lower than economists’ expectation for 0.7%.
In the fourth quarter, the value of all goods and services used in production grew by 1.4%.
But personal consumption, which makes up over two-thirds of output, was stronger than forecast. Together with housing investment, consumers held up the economy in the first three months of this year as weak business spending slowed it down.
Lower oil prices hurt energy and mining activity and bloated inventories took away from growth.
“The negatives of this drop in oil prices in terms of corporate earnings and capital investing is very much an upfront hit,” Steve Wood, chief market strategist for North America at Russell Investments, told Business Insider. “But the benefits from spending, disposable income – it takes a longer time to roll out and to feel those benefits.”
Personal consumption rose 1.9%; it was expected to have slowed to 1.7%. Core personal consumption expenditures grew 2.1% quarter-on-quarter (versus an anticipated 1.9%).
The personal savings rate increased alongside spending, by 5.2% versus 5% in the fourth quarter.
It may be too soon, however, to read too much into all this data. There will be two more revisions of the data, and so the numbers could change. Also, first-quarter GDP has averaged below other quarters for the past few years, causing some economists to question how the Commerce Department makes its seasonal adjustments.