US economy grinds to near-halt

Thursday, April 28, 2016
By Paul Martin

By Peter Spence, economics correspondent
28 APRIL 2016

The US economy has slowed to its weakest pace in two years, as plunging oil prices and global anxiety brought growth to a near standstill.

The economy grew by just 0.1pc in the first quarter of the year, according to the Bureau of Economic Analysis (BEA), well below the 0.4pc gain of the previous quarter, and the 0.2pc rise anticipated by analysts.

The disappointing performance marked the third straight year in which US GDP figures have missed the estimates made by forecasters. Economists attributed much of the weakness to sliding business investment, knocked by jitters over the global economy and weak oil prices.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that the figures made for “grim” reading. Non-housing investment dropped 5.9pc, its largest fall since the second quarter of 2009. The decline knocked nearly 0.1 percentage points off the quarterly pace of growth.

Mr Shepherdson said that he too had expected a “much better” set of figures for the second quarter of the year, as corporate investment should pick up as “the collapse in oil sector spending diminishes”.

Growth was also impacted by a slowdown in consumer spending, as well as the US trade deficit, and rising inventories.

Paul Ashworth, of Capital Economics, said that the world’s largest economy had been buffeted by “multiple headwinds”. “Barring a miracle, it appears that GDP growth is on course for another underwhelming gain of around 2pc this year,” he said.

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