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Published: Sat, May 06, 2017
Business | By Cristina Jennings

GDP Grew Just 0.7 Percent In First Quarter Of 2017

GDP Grew Just 0.7 Percent In First Quarter Of 2017

According to the Commerce Department, U.S. Gross Domestic Product grew at a 0.7% annual rate in the first quarter from the preceding three months.

Part of the problem for the administration is that its efforts to boost the economy are coming after the economic expansion has been underway for almost eight years.

Analysts say that's bound to be a disappointment to U.S. President Donald Trump who predicted strong economic growth on day one, once he took over the White House.

That broadening-out of demand across the US economy should create a solid picture for the consumer in the second quarter, said Sam Bullard, senior economist at Wells Fargo Securities LLC in Charlotte, N.C.

"Retail trade and accommodation services were the main contributors to the negative growth in this sector". That's compared with an increase of 2 percent in the fourth quarter of 2016. "That's something we expect to continue over the next couple of years", Fed Chair Janet Yellen said. Yet they also caution that the Fed may eventually raise rates to a point where they will begin to constrain growth, making it harder for Trump to achieve his GDP goals.

Other components of consumption were mostly stronger. And exports rose steadily amid a strengthening global economy.

While some of the slowdown may be temporary, inflation is eating into consumers' wallets.

But economists believe there were very tangible reasons for the flagging spending in the first quarter that won't be a factor heading further into the year.

Traders pinpointed the problem with the GDP as slow consumer spending. This was the economy he inherited - sluggish growth with modest employment gains.

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The U.K. economy slowed more than expected in the first quarter, preliminary official data showed on Thursday.

The decline in growth is due to the smallest increase in consumer spending since the end of 2009, which broadly mirrors fewer vehicle sales.

Auto dealers were sitting on a 72-day supply of vehicles on average in March, up from 66 days a year earlier, according to researcher WardsAuto.com. However, it still remained at an elevated level, according to the University of MI. Data out last week showed United Kingdom retail sales fell at the fastest pace since 2010 as higher consumer prices (following sterling's devaluation) combined with muted wage growth hurt households' spending power.

Hiring freeze or thaw? State and local government investment also fell.

And when consumers don't buy, stores don't invest in restocking their shelves.

Businesses will probably start refilling their inventories now, he says, which will boost growth next quarter. Putting more money in the hands of consumers rather than stoking business investment (which is already high - a "9.4% pace, the biggest jump since late 2013") should be a priority.

The slowdown contrasted with surveys showing surging confidence among Americans and the booming stock market. In the fourth quarter, output grew at a 2.1% rate.

A measure of private domestic demand increased at a 2.2 percent rate last quarter.

The ONS singled out the Brexit hit to inflation for the retail slowdown, caused by the slump in the pound since the European Union referendum and the corresponding increasing in import costs and consumer prices.

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