WASHINGTON – The U.S. economy barely grew in the first quarter as harsh winter weather chilled investment and exports dropped. The expansion stalled even as consumer spending on services rose by the most 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 Wednesday in Washington. 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 policy makers meeting Wednesday in Washington will probably take little heed.
“So much of this is conditioned by that anomalous drop in exports and inventories and by the weather effect, and if anything one expects more of a rebound in the second quarter,” said Samuel Coffin, an economist at UBS Securities LLC in New York, who projected a 0.5 percent gain in GDP. Coffin called this an “odd day” for Fed policy makers. “I think they’re still tapering. I think they’ll blame this on the weather.”
Companies added more workers in April than at any time in the previous five months, signaling further progress in the labor market, a private payrolls report also showed Wednesday. The 220,000 increase in employment followed a revised 209,000 gain the prior month that was stronger than initially estimated, according to figures Wednesday from the Roseland, N.J.-based ADP Research Institute. The median forecast of economists surveyed by Bloomberg called for an advance of 210,000 in April.
Stocks dropped and the dollar weakened after the report. The Standard & Poor’s 500 Index declined 0.2 percent to 1,875.53 at 9:41 a.m. in New York. The dollar fell 0.4 percent to $1.3863 per euro