US economy stalls in first quarter as exports tumble

The US economy barely grew in the first quarter as exports tumbled and businesses accumulated stocks at the slowest pace in nearly a year, but activity already appears to be bouncing back.

Gross domestic product expanded at a 0.1 per cent annual rate, the slowest since the fourth quarter of 2012, the US Commerce Department said today.

That was a sharp pullback from the fourth quarter’s 2.6 per cent pace and was worse than economists’ expectations for a slowdown to a 1.2 per cent rate.

The slowdown partly reflected an unusually cold and disruptive winter, marked by declines in sectors ranging from business spending to home building.

The Commerce Department's first snapshot of first-quarter growth was released just hours before the Federal Reserve wraps up a two-day policy meeting.

While harsh weather partially explains the weakness in growth, the magnitude of the slowdown could complicate the US central bank’s message as it sets to announce a further reduction in the amount of money it is pumping into the economy through monthly bond purchases.

US stock index futures fell slightly on the report, while US Treasury debt prices trimmed losses. The first-quarter stall in growth, however, is likely to be temporary and recent data have suggested strength at the tail end of the quarter. Separately, the ADP National Employment Report showed private employers added 220,000 jobs to their payrolls in April after increasing headcount by 209,000 in March.

"This weakness is not carrying through the second quarter," said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh. Economists estimate severe weather could have chopped off as much as 1.4 percentage points from GDP growth. The government, however, gave no details on the impact of the weather.

Reuters