U.S. economic growth nearly stalled in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending. Gross domestic product expanded at an only 0.2 percent annual rate, the Commerce Department said on Wednesday. That was a big step down from the fourth quarter’s 2.2 percent pace and marked the weakest reading in a year.
A strong dollar and a now-resolved labor dispute at normally busy West Coast ports also slammed growth, the government said. While there are signs the economy is pulling out of the soft patch, the lack of a vigorous growth rebound has convinced investors the U.S. Federal Reserve will wait until late this year to start hiking interest rates.
The recovery is the slowest on record and the economy has yet to experience annual growth in excess of 2.5 percent. “The U.S. economy has yet to demonstrate the self-sustaining resilience that the Fed wants to see before raising interest rates,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. “A June liftoff is now off the table, our forecast for a September move holds but even that has become tenuous.”
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