The 0.2% annualised gain will raise fears that the recovery is coming off the rails. But, over the past 12 months the domestic economy has expanded by close to 3%, which represents a clear acceleration from nearer 2% in 2012 and 2013.
Consumption growth slowed to a modest 1.9% in the first quarter, from 4.4%, which is particularly disappointing given that the decline in energy prices generated a massive 6.2% annualised jump in real personal disposable income. Investment was unusually weak, but here the main reason was the slump in mining investment, which triggered a 23.1% annualised decline in non-residential structures.
U.S. economy all but stagnated in the first quarter, as lower energy prices triggered a big drop in mining investment, but did little to boost consumer spending because of the impact of the unseasonably cold winter in the Northeast.
"Most Fed officials appear to share our view that this is a temporary slowdown, albeit a more severe deceleration than we previously anticipated. Accordingly, while it might delay the timing of the first rate hike, we still anticipate a lift-off later this year. Similarly, the news of a first-quarter stagnation last year didn't prevent the Fed from continuing to reduce the pace of its asset purchases at last April's FOMC meeting." said Capital Economics in a report on Wednesday
