WASHINGTON: U.S. economic growth braked sharply to its slowest pace in two years as consumer spending softened and a strong dollar continued to undercut exports, but a pick-up in activity is anticipated given a buoyant labor market.
Gross domestic product increased at a 0.5 percent annual rate, the slowest since the first quarter of 2014, the Labor Department said on Thursday in its advance estimate, also as businesses doubled down on efforts to reduce unwanted merchandise clogging up warehouses.
The economy was also blindsided by cheap oil, which has hurt the profits of oil field companies like Schlumberger and Halliburton, resulting in business spending contracting at its fastest pace since the second quarter of 2009, when the recession was ending.
Economists polled by Reuters had forecast the economy expanding at a 0.7 percent rate in the first quarter.
The economy grew at a 1.4 percent pace in the fourth quarter.
Almost all sectors of the economy weakened in the first quarter, with the housing market the lone star. The slowdown in growth is likely temporary, given a fairly robust jobs market.
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