Economic growth slowed in the first quarter of 2016, the Bureau of Economic Analysis reported Thursday morning.
Gross Domestic Product grew at just a 0.5 percent annual rate adjusted for inflation, the agency said, down from a 1.4 percent clip to end 2015. The result was right in line with investors’ downbeat expectations.
That was the worst quarterly growth in two years.
Commerce is not off to the start officials had envisioned for 2016. Federal Reserve officials in December forecasted 2.4 percent growth for the year, but the economy is now well behind that pace.
The slowdown was attributable in large part to a big drop in business investment, which pared 0.6 percentage points off the growth rate. Consumer spending stayed robust, but slowed for the fourth straight month to a 1.9 percent rate.
The U.S. is also still facing headwinds from overseas, as illustrated by net exports shrinking for a second month in a row. Exports fell at a 2.6 percent annual clip. Federal Reserve officials have blamed the strength of the dollar over the past two years for the woes of U.S. manufacturers, who have seen their products become more expensive for foreign buyers.
The domestic economy, however, appeared more resilient. Sales of goods and services to U.S. businesses and consumers, rather than to the government or overseas buyers, were up at a 1.2 percent rate.
Thursday’s news played into Republican criticisms of President Obama’s stewardship of the economy. In a statement, House Ways and Means Committee chairman Kevin Brady called the report “dismal” and said that it was a “wake up call” regarding current policies.
While GDP is weak, however, other signals of the economy remain strong. Jobless claims, also released Thursday morning, hovered near the lowest levels in 40 years, an indication that layoffs are rare and the jobs outlook is still bright.
Another factor that investors and government officials will have to gauge as they react to Thursday’s report is that, in recent years, the first quarter of the year has regularly underperformed. Some analysts believe that the weak first quarters may be an artifact of the way that the Bureau smooths out seasonal fluctuations in the data.
Thursday’s report is the first of three to be released for GDP, and the numbers are subject to ificant revision.
