(Bloomberg) — The world’s largest economy sputtered to a near-halt in the first quarter, choked by a slump in U.S. business investment and exports that dimmed hopes for a meaningful short-term rebound.
Gross domestic product rose at a 0.2 percent annualized rate after advancing 2.2 percent the prior quarter, Commerce Department data showed Wednesday in Washington.
The figures come as Federal Reserve policy makers meet, and the weaker-than-forecast reading signals officials will be in no rush to raise interest rates. While the economy is likely to bounce back from the temporary restraints of harsh winter weather and delays at West Coast ports, the harm caused by the plunge in fuel prices and stronger dollar will probably prove longer-lasting.
“There’s not a whole lot of momentum heading into the second quarter,” said Mike Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “We expect the economy to be better, but some of the details in this report are cautionary.”
Stocks fell as investors awaited the Fed’s statement. The Standard & Poor’s 500 Index declined 0.6 percent to 2,102.14 at 12:12 p.m. in New York.
The median forecast of 86 economists surveyed by Bloomberg projected GDP would rise 1 percent. Forecasts ranged from little change to a 1.5 percent gain. It was the weakest performance since the first three months of last year, when bad weather also damped growth.
Corporate fixed investment decreased at a 2.5 percent annualized pace in the first quarter, the biggest decline since the end of 2009. Spending on nonresidential structures, including office buildings and factories, dropped 23.1 percent, the most in four years.
The decline reflected weakness in petroleum exploration as oil companies slashed budgets on the heels of plunging crude prices. Spending on wells and mines fell at a 48.7 percent annualized rate in the first three months of the year, the biggest drop since the second quarter of 2009, when the economy was still in the recession.
Halliburton Co., the world’s second-biggest provider of oilfield services, has said it expects to reduce capital spending by 15 percent this year and accelerated the pace of job cuts ahead of its takeover of Baker Hughes Inc.
Not all aspects of business investment were weak. Outlays on research and development climbed at a 12.3 percent pace following a 17.2 percent advance at the end of last year that marked the strongest back-to-back quarters since 1960.
Trade also hindered the economy last quarter, subtracting 1.25 percentage points from growth, according to the Commerce Department’s GDP report. The dollar’s more than 20 percent advance since the end of June and uneven overseas growth contributed to a drop in exports. The trade deficit swelled to an annualized $522.1 billion rate from $471.4 billion.
Housing shows signs of firming. Home-building managed to eke out a gain last quarter even with the harsh weather, according to Wednesday’s report.