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U.S. economy slowed to near-standstill in first quarter

Associated Press
April 30, 2014
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The U.S. economy slowed drastically in the first three months of the year as a harsh winter exacted a toll on business activity. The sharp slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather.

The economy's growth slowed to a barely discernible 0.1-percent annual rate in the January-March quarter, the Commerce Department said Wednesday. That was the weakest pace since the end of 2012 and was down from a 2.6-percent growth rate in the October-December quarter.

Consumer spending grew at a 3-percent rate. But that gain was dominated by a 4.4-percent rise in spending on services, reflecting higher utility bills. Spending on goods barely rose. Also dampening growth were a drop in business investment, a rise in the trade deficit and a fall in housing construction.

The scant 0.1-percent increase in the gross domestic product, the country's total output of goods and services, was well below the 1.1-percent rise economists had been predicting. The last time the quarterly growth rate was so slow was in the final three months of 2012, when it was also 0.1 percent.

A variety of factors held back growth. Business investment fell at a 2.1-percent rate, with spending on equipment plunging at a 5.5-percent annual rate. Residential construction fell at a 5.7-percent rate. Housing was hit by winter weather and by other factors such as higher home prices and a shortage of available houses.

A widening of the trade deficit, thanks to a sharp fall in exports, shaved growth by 0.8 percentage point in the first quarter. Businesses also slowed their restocking, with a slowdown in inventory rebuilding reducing growth by nearly 0.6 percentage point.

Also holding back growth: A cutback in spending by state and local governments. That pullback offset a rebound in federal activity after the 16-day partial government shutdown last year.

Economists say most of the factors that held back growth in the first quarter have already begun to reverse. Most expect a strong rebound in growth in the April-June quarter. The consensus view is the economy will expand by 3 percent in the second quarter.

Analysts say the stronger growth will endure through the rest of the year as the economy derives help from improved job growth, rising consumer spending and a rebound in business investment.

In fact, many analysts believe 2014 will be the year the recovery from the Great Recession finally achieves the robust growth that's needed to accelerate hiring and reduce still-high unemployment. Many analysts think annual economic growth will remain around 3 percent for the rest of the year.

If that proves accurate, the economy will have produced the fastest annual expansion in the gross domestic product, the broadest gauge of the economy's health, in nine years. The last time growth was so strong was in 2005, when GDP grew 3.4 percent, two years before the nation fell into the worst recession since the 1930s.

A group of economists surveyed this month by The Associated Press said they expected unemployment to fall to 6.2 percent by the end of this year from 6.7 percent in March.

One reason for the optimism is that a drag on growth last year from higher taxes and deep federal spending cuts has been diminishing. A congressional budget truce has also lifted any imminent threat of another government shutdown. As a result, businesses may find it easier to commit to investments to modernize and expand production facilities and boost hiring.

State and local governments, which have benefited from a rebound in tax revenue, are hiring again as well.

A survey by the private Conference Board released Tuesday found that while U.S. consumer confidence dipped this month, many people foresee a strengthening economy in the months ahead.

Joel Naroff, chief economist at Naroff Economic Advisors, said he expects job growth to average above 200,000 a month for the rest of the year — starting with the April jobs report, which will be released Friday.

"Those are the types of job gains that will generate incomes and consumer confidence going forward," Naroff said.

Naroff said solid job growth should lead consumers, who drive about 70 percent of the U.S. economy, to boost spending. He expects pent-up demand from purchases that were put off during the harsh winter to power a burst of growth in the April-June quarter. He thinks annual growth for the quarter will reach a vigorous 4.3 percent.

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  1. I think the poster was being sarcastic and only posting or making fun of what is usually posted on here about anything being built in BR or d'town for that matter.

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  3. So disappointed in WIBC. This is the last straw to lose a good local morning program. I used to be able to rely on WIBC to give me good local information, news, weather and traffic on my 45 minute commute.Two incidents when I needed local, accurate information regarding severe weather were the first signs I could not now rely on WIBC. I work weekend 12 hour nights for a downtown hospital. This past winter when we had the worst snowfall in my 50 years of life, I came home on a Sunday morning, went to sleep (because I was to go back in Sunday night for another 12 hour shift), and woke up around 1 p.m. to a house with no electricity. I keep an old battery powered radio around and turned on WIBC to see what was going on with the winter storm and the roads and the power outage. Sigh. Only policital stuff. Not even a break in to update on the winter storm warning. The second weather incident occurred when I was driving home during a severe thunderstorm a few months ago. I had already gotten a call from my husband that a tornado warning was just southwest of where I had been. I turned to WIBC to find out what direction the storm was headed so I could figure out a route home, only to find Rush on the air, and again, no breaking away from this stupidity to give me information. Thank God for my phone, which gave me the warning that I was driving in an area where a tornado was seen. Thanks for nothing WIBC. Good luck to you, Steve! We need more of you and not the politics of hatred that WIBC wants to shove at us. Good thing I have Satellite radio.

  4. I read the retail roundup article and tried Burritos and Beers tonight. I'm glad I did, for the food was great. Fresh authentic Mexican food. Great seasoning on the carne asada. A must try!!! Thanks for sharing.

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