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Friday 30 September 2016

US economy stalls in last quarter on bad weather

Lucia Mutikani

Published 30/04/2015 | 02:30

Traders work on the floor of the New York Stock Exchange shortly after the opening bell
Traders work on the floor of the New York Stock Exchange shortly after the opening bell

US economic growth braked more sharply than expected in the first quarter as harsh weather dampened consumer spending and energy companies struggling with low prices slashed spending.

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However, there are signs that activity is picking up.

Gross domestic product expanded at an only 0.2pc annual rate, the Commerce Department said yesterday. That was a big step down from the fourth quarter's 2.2pc pace and marked the weakest reading in a year.

A strong dollar and a now-resolved labour dispute at normally busy West Coast ports also slammed growth, the government said. The weak growth, though probably temporary, reduces the chances of a June interest rate hike from the Federal Reserve.

"A stalling of US economic growth at the start of the year rules out any imminent hiking of interest rates by the Fed," said Chris Williamson, chief economist at Markit in London.

Economists polled by Reuters had forecast the economy expanding at a 1pc rate.

The dollar fell to an eight-week low against a basket of currencies after the report. The yield on the benchmark 10-year US Treasury bond retreated from a six-week high.

The sharp growth slowdown is probably not a true reflection of the economy's health, given the role of temporary factors.

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