The US economy grew by 0.7% in the first quarter, weaker than expected, according to an advance estimate of gross domestic product from the Department of Commerce released Friday.
It was the slowest pace in three years, weighed down by weak consumer spending even though business investment was healthy.
Economists had forecast GDP rose at an annualized rate of 1%, according to Bloomberg.
The slowdown from the fourth quarter, when the economy grew 2.1%, is in line with the sluggishness that has characterized every first quarter in this recovery.
That’s partly because of seasonal-adjustment issues that the Bureau of Economic Analysis has not yet resolved.
This time, the lull can also be attributed to weaker consumer spending. Personal consumption grew by 0.3%, the weakest pace since 2009, slowing from a 3.5% growth pace in the fourth quarter.
Data on retail sales and personal outlays released from January through March previewed this drop in spending. Auto sales fell every month in the first quarter. Economists also pointed to delayed tax returns as one reason spending dropped.
Private, fixed nonresidential investment – business investment – was a major contributor to growth, as mining exploration rebounded. Homebuilding also boosted the economy in the first quarter.
Government spending fell 1.7% amid cuts in defense spending and state and local government expenditures.
“This lull in growth should be short-lived, as real GDP growth is expected to rebound to 2.5% this quarter and then rise to 3.5% in Q3 and 4.0% in Q4,” Joseph LaVorgna, Deutsche Bank’s chief US economist, said in a preview.
These forecasts, he added, assume the economy will get some fiscal stimulus in the coming months. But as the failure of Republicans’ healthcare bill showed, the timing of policy reform is uncertain. President Donald Trump has promised to return the economy to 3% growth, although the low rate of worker productivity has many economists doubtful this is possible right now.
This GDP report is the first major scorecard of the economy since Trump took office 99 days ago.
“Wait ’til you see the growth,” Trump said on Thursday. He said the growth “is going to pay for” proposed tax cuts in the administration’s plan, unveiled Wednesday.