(CN) – The U.S. economy grew at its weakest pace in three years in the first quarter, slowed by consumers sharply curtailing their spending, the government said Friday.
The Bureau of Economic Analysis said the nation’s gross domestic product, the measure of the total output of goods and services, grew by just 0.7 percent in the first quarter following a gain of 2.1 percent in the fourth quarter of 2016.
The 0.7 percent increase was the worst showing since GDP contracted by 1.2 percent in the first quarter of 2014.
The bureau, an agency of the U.S. Commerce Department, attributed the tepid pace of growth to a slowdown in consumer spending, which grew by 0.3 percent after a 3.5 percent gain at the end of last year.
The first quarter showing in consumer spending was the poorest growth in that category in more than seven years.
All in all, not the kind of news President Donald Trump wanted to hear on the eve of his 100th day in office or after his campaign promises to get the economy growing by 3 percent a year or better.
At the present rate, economic growth won’t likely surpass 2 percent when the numbers come in for the first half of 2017. And most economists are forecasting growth for the entire year to be around 2.2 percent.
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. These include unseasonably warm weather in most of the country, which tamped down utility bills and spending on winter clothes and the like; a drop in auto sales; and the delay in sending out refund checked by the Internal Revenue Service.
And when consumers don’t buy, stores don’t invest in restocking their shelves.
Trump may take solace too in the fact he only rolled out his proposed tax cuts — which he said would be a key driver of his growth policies during the campaign — on Wednesday.
In announcing the proposed cuts and revisions of the tax code, Treasury Secretary Steven Mnuchin said he believed growth above 3 percent would be achievable.
Inflation in the 19-country eurozone is back up at the European Central Bank’s targeted level as a strengthening economy helps drive up prices, stoking speculation that the bank could start winding down its stimulus measures sooner than thought.
In other economic news, European statistics agency Eurostat said Friday that its headline rate rose to 1.9 percent over the year to April from 1.5 percent the previous month.
The increase, more than had expected, means inflation is back at the European Central Bank’s target of just below 2 percent.
Eurozone inflation has been rising significantly this year, mainly driven by climbing oil prices.
The Eurozone’s core inflation rate, which does not include the cost of food, energy, alcohol or tobacco, rose to 1.2 percent from 0 .7 percent.