The economy in the U.S. expanded at the weakest pace in the past three years during the first three months of 2017 as spending by consumers was nearly flat and investments in inventories by businesses were down, in a possible setback to the promise by President Donald Trump to boost economic growth.
The U.S. gross domestic product was up just 0.7% for an annual rate as the government cut defense spending, said the Commerce Department on Friday. The last time the performance was that weak was during the first three months of 2014.
The economic growth was at a pace of 2.1% during the 2016 fourth quarter. Economists forecasted an increase in the GDP to 1.2% for the first quarter of 2017.
However, the pedestrian growth pace for the first quarter is not that true of a picture of the health of the economy.
The labor market currently is close to full employment and the confidence of consumers is close to highs of multi-years, which suggests that the sharp slowdown mostly created by weather in spending by consumers is likely to be short-lived.
A private domestic demand measure increased at a rate of 2.2% for the just ended quarter. GDP for the first quarter usually underperforms due to problems with calculating certain data that the government acknowledged and is trying to rectify.
Even if the temporary restraints and seasonal quirk did not exist, economist said it would be hard for Trump to follow through with his pledge to increase the annual growth of the GDP to 4%, without productivity increases.
Trump has targeted spending on infrastructure, cuts in taxes and deregulation as a way to achieve the goal of faster growth of the economy.
Wednesday the White House administration released it proposed tax plan which includes cutting the rate of corporate income tax from 35% to 15%, but did not offer details.
Growth in spending by consumers, which represents over two-thirds of the economic activity in the U.S., slowed down to a rate of 0.3% during the first quarter of 2017.
That pace was the slowest since the 2009 fourth quarter and followed the robust fourth quarter growth rate of 3.5%.
Consumer spending weakness has been blamed on the mild winter that undermined the demand for utilities and heating production. Higher inflation that saw expenditures in personal consumption average 2.4% during the first three months of the year, which was the highest since the 2011 second quarter, also weighed on spending by consumers.