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Home » Featured » US Q1 GDP Slows to 0.2%

US Q1 GDP Slows to 0.2%

Posted by FXTimes in Featured - April 29th, 2015 12:33 pm GMT

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US GDP growth slowed more than forecast in the first quarter, mirroring last year’s slow start as severe weather and plunging oil prices weighed on economic activity.

US GDP expanded at an annual rate of 0.2 percent in the fourth quarter, following a 2.2 percent increase in the fourth quarter, the Commerce Department reported on Wednesday. A median estimate of economists expected GDP to slow to 1 percent annually.

“The deceleration in real GDP growth in the first quarter reflected a deceleration in PCE, downturns in exports, in nonresidential fixed investment, and in state and local government spending, and a deceleration in residential fixed investment that were partly offset by a deceleration in imports and upturns in private inventory investment and in federal government spending,” the Commerce Department said in a press release.

Severe weather played a major role in the slumping economy, although the impacts of the oil price collapse and a stronger US dollar were probably the biggest factors.

Real personal consumption expenditure, which accounts for about 70 percent of the US economy, increased 1.9 percent in the first quarter following an increase of 4.4 percent in the final three months of 2014.

Corporate fixed investment fell 2.5 percent annually, the worst performance since 2009. Exports, which have declined for four consecutive months, were down 7.2 percent in the first quarter after rising 4.5 percent in the fourth. Imports advanced 1.8 percent in Q1 compared with 10.4 percent in the fourth quarter.

The Federal Reserve downgraded its GDP outlook in March, potentially giving policymakers more room to keep interest rates at record lows. The economy is forecast to grow between 2.3 percent and 2.7 percent this year, down from the previous forecast of 2.6 percent to 3 percent.

The Federal Open Market Committee wraps up its two-day meetings on Wednesday. No change to the federal funds rate is expected, although officials could give clues about the path of monetary policy in the official rate statement and accompanying press conference. The Fed is expected to keep rates low for the duration of the summer and could signal no rush to begin normalizing policy after today’s GDP report.

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