A slump in consumer spending caused the US economy to grow at its weakest pace in three years between January and March. GDP increased by just a 0.7 percent annual rate.
However there was a surge in business investment and improved wage growth which suggests momentum will return soon.
Still the soft patch undermines Donald Trump’s boast that he would significantly boost growth from day one.
Carsten Brzeski, Chief Economist at ING-DIBA, said: “Everyone talks about Trump, he also talked a lot, but in the end if you really look at what he delivered, it’s very little. So we had two weeks of actions with two weeks full of presidential orders, but in the end his big projects like more protectionism, like tax reforms, like a big investment programme, all these economic reforms have never happened.”
Economists were largely expecting weak growth at the start of the year and see it as a blip, not a sign of stagnation.
It is unlikely to dissuade policy makers at the US central bank, the Federal Reserve, from raising interest rates in the coming months.
Peter Temin says US is like a Third World dual economy with stagnating income for surplus labor and growth only at the top pic.twitter.com/fe7XFqov3g— William Easterly (@bill_easterly) May 2, 2017