WASHINGTON -- The U.S. economy from January through March inched forward at the weakest pace in two years, the Commerce Department reported Thursday.
The gross domestic product, the broadest measure of economic health, grew by a tiny 0.5 percent in the first quarter, down from 1.4 percent growth in the fourth quarter.
The January-March performance was the poorest showing since GDP contracted by 0.9 percent in the first three months of 2014.
Ian Shepherdson, chief economist at Pantheon Macroeonomics, said the GDP report "looks grim, but the second quarter will be much better."
Since this recovery began almost seven years ago, GDP has been weak in the first quarter each year only to rebound in the spring. Economists are looking for a similar pattern this year, forecasting tepid second-quarter growth.
"The U.S. economic slowdown is proving to be sticky," Gregory Daco, head of U.S. macroeconomics at Oxford Economics in New York, said in a note to clients. "Early second-quarter data readings point to a modest GDP growth rebound in the low 2 percent."
The year got off to a rocky start, with troubles in China causing a nose dive in global financial markets. A steep plunge in oil prices also has triggered more cutbacks in the U.S. energy sector.
The head winds led economists to lower their forecasts for first-quarter growth, and the Federal Reserve slowed its pace for raising interest rates.
For the first quarter, consumer spending, which accounts for 70 percent of economic activity, grew at a 1.9 percent rate. That's down from 2.4 percent in the fourth quarter and the weakest showing in a year.
"The fact that personal consumption is a bit on the soft side is a disappointment, especially in light of the low gasoline prices," said Thomas Costerg, senior economist at Standard Chartered Bank in New York, who correctly projected first-quarter growth. "Consumption seems to be stuck in a low gear."
Business investment dropped at a 5.9 percent rate, the biggest quarterly decline since the depths of the recession in 2009. The decline was led by a record 86 percent drop in the category that covers oil and gas exploration. U.S. energy companies have cut back sharply in response to falling global oil prices.
Adding to the weakness, the rise in the value of the dollar over the past year hurt exports and drove up the trade deficit. The higher deficit subtracted 0.3 percentage point from growth in the first quarter. A further slowdown in business spending to restock their store shelves also trimmed 0.3 percentage point from growth in the first quarter.
The Federal Reserve, wrapping up two days of discussion on Wednesday, took note of weak spots in the U.S. economy and decided for the third-straight meeting to keep its key policy rate unchanged in a range of 0.25 percent to 0.5 percent. The Fed said that "economic activity appears to have slowed," citing a moderation in consumer spending and weakness in business investment and exports.
The first-quarter slowdown followed by a second-quarter rebound has become a regular feature of this economic expansion, which began in June 2009.
GDP growth has averaged a paltry 0.8 percent in the first quarter over the past six years, while second-quarter growth has averaged 3.1 percent, nearly four times faster.
"The first quarter is going to be the worst quarter for consumption for all of 2016," said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. "With financial markets calming down and retracing all of their losses, the fundamental factors that have driven consumption will continue to do so."
Although forecasters are projecting the first-quarter weakness will be followed by a rebound in the April-June quarter, they are not expecting as big a bounce back as in some years. in part because of the head winds facing the economy.
Mark Zandi, chief economist at Moody's Analytics, is forecasting second-quarter GDP growth of 2.8 percent and around 2.8 percent growth in the second half of this year, For the entire year, he is looking for the economy to expand 2.1 percent, slightly below the 2.4 percent growth turned in during 2014 and 2015 but right in line with the average for this recovery, which has featured subpar growth rates.
The gross domestic product report Thursday is the first of three estimates from the Bureau of Economic Analysis; subsequent revisions could move the number higher or lower.
Information for this article was contributed by Martin Crutsinger of The Associated Press by Michelle Jamrisko and Rich Miller of Bloomberg News; and by Nelson B. Schwartz of The New York Times.
A Section on 04/29/2016