The US economy hobbled along at a weaker-than-expected pace in the first quarter as the war in Iraq and severe winter weather affected spending and investment, a government report showed today.
US gross domestic product, the broadest measure of the economy's health, grew by an anemic 1.6 per cent in the first three months of the year, the US Commerce Department said.
That was a bit faster than the 1.4 per cent growth rate recorded in the fourth quarter of last year, but it fell well short of the revival in growth some economists had been hoping to see in this report.
US economists in a Reuters survey had expected a 2.3 per cent rise in GDP. Consumers, who were nervous in the run-up to the March 20th start of the war against Iraq, spent cautiously. Their spending increased a mere 1.4 per cent in the first quarter. Spending decelerated from a 1.7 per cent growth rate in the fourth quarter of 2002.
A pullback in car sales accounted for much of the weakness. Anecdotal reports have suggested that harsh winter weather kept consumers from the shopping malls in some parts of the country during February and early March.
Business investment in new plants and equipment proved to be surprisingly weak, contracting by 4.2 per cent in the first quarter following a 2.3 per cent rise in the fourth quarter. Spending on equipment and software fell by 4.4 per cent.
One surprise in the report was a 1.5 per cent decline in defence spending that came even as the Pentagon was sending thousands of troops and loads of equipment to the Middle East to prepare up for the war.