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 on Friday.
It was the slowest pace in three years.
Economists had forecast that 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 characterised every first quarter in this recovery. That’s partly due to seasonal adjustment issues that the Bureau of Economic Analysis has not yet resolved.
The lull can be attributed to weaker consumer spending in the first three months of the year. 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 previewed this drop in spending. Auto sales fell every month from January through March. Economists also pointed to delayed tax returns as one reason why spending dropped.
Private, fixed nonresidential investment — or business investment — was a major contributor to growth, as mining exploration rebounded. Homebuilding also boosted the economy in the first quarter.
“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,” said Joseph LaVorgna, Deutsche Bank’s chief US economist, in a preview.
These forecasts, he added, assume that the economy will get some fiscal stimulus in the coming months. But as the 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 that this is possible right now.
This GDP report is the first major scorecard of the economy since Trump took office 99 days ago.
“Wait till you see the growth,” Trump said on Thursday. “The growth is going to pay for” the tax cuts unveiled on Wednesday, he added.