Growth in the U.S. economy slowed dramatically — to just 0.1 percent — in the January-March quarter amid a particularly harsh winter, according to a report Wednesday from the Commerce Department.
The latest GDP figure was down from 2.6 percent growth in the fourth quarter of last year and represents the weakest growth since the end of 2012.
The Bureau of Economic Analysis said a drop in exports and business investment, especially on transportation equipment, computers and peripherals and a fall in housing construction — tied to the weather — were also major factors.
The sharp slowdown, while worse than expected, is likely to be temporary as growth rebounds with warmer weather, The Associated Press says.
Consumer spending grew at a 3 percent rate. But the gain was dominated by a 4.4 percent rise in spending on services, reflecting higher utility bills, according to the AP.
The Wall Street Journal wrote in a preview of the numbers:
It was the coldest December-to-February stretch in four years across the 48 contiguous U.S. states, and the country then shivered through its chilliest March since 2002. That hurt. Many economists have blamed unusually cold and snowy weather, especially across the eastern U.S., for weak patches this winter in retail sales, factory production and other economic data.
IHS Global Insight Economist Paul Edelstein says that "while forecasts were universally for a slowdown in growth, this was considerably worse than expected. IHS forecasted growth of 0.7 percent, below the Consensus estimate of 1.2 percent.
"It is therefore tempting to wonder if the economy was plagued by more than just weather last quarter," Edelstein says. "Fortunately, higher-frequency economic indicators for March and April largely point to a rebound in activity in the spring."
The latest BEA report comes as the ADP National Employment Report said that private sector employment increased by 220,000 jobs in the March-April period.
That report is derived from ADP's actual payroll data and measures the change in total nonfarm private employment each month on a seasonally adjusted basis.
The Federal Reserve's policymaking committee will conclude a meeting on Wednesday and is widely expected to announce a $10 billion cut in its monthly bond purchases as part of its tapering off of the economic stimulus.
Update at 2:05 p.m. ET:
In a statement following the Federal Open Market Committee meeting, it issued the following statement:
"The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases.
"Beginning in May, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $20 billion per month rather than $25 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $25 billion per month rather than $30 billion per month."