The Economy

U.S. Q1 GDP Growth Slows to 0.5%

Higher imports, lower nonresidential fixed investment, and a downturn in federal government spending contributed to the weak growth.
Katie Kuehner-HebertApril 28, 2016

The U.S. economy is on track to repeat the same pattern its followed each year during the recovery, analysts say: log weak growth in the first quarter only to rebound in the spring.

The U.S. gross domestic product grew by just 0.5% in the first quarter, down from 1.4% growth in the fourth quarter, the Commerce Department said Thursday.

The January-March performance was the poorest showing since GDP contracted by 0.9% in the first three months of 2014, according to the Associated Press. Economists are looking for second-quarter GDP growth to rebound and hit about 2%.

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Ian Shepherdson, chief economist at Pantheon Macroeonomics, told the Associated Press that the GDP report “looks grim, but the second quarter will be much better.”

First-quarter GDP was negatively impacted by the troubles in China, along with more cutbacks in the U.S. energy sector due to a steep plunge in oil prices. Adding to the weakness, the rise in the value of the U.S. dollar over the past year hurt exports and drove up the trade deficit, which subtracted 0.3 percentage point from growth in the first quarter.

Consumer spending grew at a 1.9% rate, down from 2.4% in the fourth quarter and the weakest showing in a year. Business investment dropped at a 5.9% rate, “the biggest quarterly plunge since the depths of the recession in 2009,” according to the Associated Press. The decline was led by a record plunge in the category that covers oil and gas exploration.