WASHINGTON: Economic growth stalled in the first quarter as harsh winter weather chilled business investment, exports dropped and inventories climbed at a slower pace. Consumer spending rose more than forecast, propelled by the biggest gain in services in 14 years.
Gross domestic product grew at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, figures from the Commerce Department showed. The median forecast of 83 economists surveyed by Bloomberg called for a 1.2 percent increase. Household purchases rose at a 3 percent pace, spurred by utility outlays and spending on health care tied to President Barack Obama’s Affordable Care Act.
The pullback in growth came as snow blanketed much of the eastern half of the country, keeping shoppers from stores, preventing builders from breaking ground and raising costs for companies including United Parcel Service Inc.
Gains in retail sales, employment and manufacturing at the end of the quarter indicate the setback will be temporary, so Federal Reserve policymakers meeting in Washington will probably take little heed.
“The first two months of the quarter were quite weak,” said Millan Mulraine, deputy head for U.S. research and strategy at TD Securities USA LLC in New York, before the report. “The biggest story would not necessarily be first quarter performance, because it’s been essentially a write-off, but what happens thereafter.”
Economists’ projections for GDP, the value of all goods and services produced, ranged from unchanged to 2 percent. The Wednesday report is the first of three for the quarter, with the next reading scheduled for May 29, at which point more data will be available.
For all of 2013, the economy expanded 1.9 percent after a 2.8 percent gain in the prior year.
The gain in consumer purchases, which account for about 70 percent of the economy, exceeded the 2 percent median forecast in the Bloomberg survey. Personal consumption added 2 percentage points to growth. Spending climbed at a 3.3 percent pace in the last three months of 2013.
While the wintry weather held back purchases of goods, which climbed at a 0.4 percent pace — the least in almost two years — it also boosted outlays on utilities to keep warm, and did little to prevent Americans from taking advantage of the health-care law, which the Commerce Department said boosted spending.
Expenditures on services climbed at a 4.4 percent pace, the biggest gain since the second quarter of 2000. Outlays of health care jumped by $43.3 billion at an annualized rate to $1.85 trillion. It contributed 1.1 percentage points to growth.