U.S. Economy Grew 0.7% in First Quarter, Slowest in Three Years

The U.S. economy expanded at the slowest pace in three years as weak auto sales and lower home-heating bills dragged down consumer spending, offsetting a pickup in investment led by housing and oil drilling.

Gross domestic product, the value of all goods and services produced, rose at a 0.7 percent annualized rate after advancing 2.1 percent in the prior quarter, Commerce Department data showed Friday in Washington. The median forecast of economists surveyed by Bloomberg called for a 1 percent gain. Consumer spending, the biggest part of the economy, rose 0.3 percent, the worst performance since 2009.

The GDP slowdown owes partly to transitory forces such as warm weather and volatility in inventories, which supports forecasts for a rebound as high confidence among companies and consumers and a solid job market underpin growth. Even so, the weakness at car dealers could weigh on expansion, and further gains in business investment could depend on the extent of policy support such as tax cuts.

There’s no cause for concern,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, citing seasonal-adjustment issues in the data and temporary factors that affected consumer spending. Business investment is “encouraging,” while consumers “had a little bit of a hangover, and they’ll bounce back in second quarter. The key will be wage gains -- we need strong wage-growth support for spending going forward.”

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