The US economy ground almost to a halt in the first threemonths of the year amid severe winter weather, official data showed Wednesday.Gross domestic product increased at an annual rate of 0.1 percent after hitting a 2.6percent pace in the 2013 fourth quarter, the Commerce Department said.While analysts had expected some slowing after monthly data suffered under anunusually heavy barrage of winter storms, the slowdown was much worse than the1.0 percent growth rate expected.It was the slowest growth since the last quarter in 2012. The world's largesteconomy has been losing steam for some time, with full-year GDP growth slowing to1.9 percent in 2013 from 2.8 percent in 2012.A World Bank report Tuesday said that China's rapidly expanding economy could
leapfrog the United States this year to take the top ranking.The Bank said that when comparing output on a purchasing-power basis, the Asianbehemoth was breathing down the neck of the US, which has dominated the worldeconomy for over a century.Driving the first-quarter US growth slump were falling exports and business
investment and a larger decrease in inventory investment, the CommerceDepartment said. Exports dived 7.6 percent after a 9.5 percent rise in the fourthquarter.Another key factor was a modest slowdown in consumer spending, which accountsfor about two-thirds of US economic activity. Consumer spending increased 3.0percent after a 3.3 percent rise in the fourth quarter.Spending fell mainly on nondurable goods, like clothing and food and beverages, asconsumers hunkered down inside.Spending picked up for utilities, with heating bills shooting up during the winterfreeze, as well as for healthcare as people signed up for insurance coverage underPresident Barack Obama's Affordable Care Act health reform.The White House said the first quarter was marked by unusually severe winterweather, including record cold temperatures and snowstorms."The president will do everything he can either by acting through executive actionor by working with Congress to push for steps that would raise growth and
accelerate job creation," said Jason Furman, chairman of Obama's Council ofEconomic Advisers.- Fed stimulus taper looms -The Commerce Department's report came as Federal Reserve policy makers met for asecond day. The Federal Open Market Committee is widely expected to announcelater in the day the central bank will keep its near-zero interest rate unchanged andfurther reduce stimulus bond purchases."Today's report should not dissuade the Fed from trimming its asset purchasesanother $10 billion to $45 billion, though it largely rules out the risk of acceleratingthe pace of tapering," said Sal Guatieri, senior economist at BMO Capital Markets.Inflation was slightly more subdued in the first quarter, coming in well below theFed's 2.0 percent target. Prices of goods and services bought by consumers rose 1.4percent in the first quarter, slowing from a 1.5 percent gain in the fourth quarter.
Excluding food and energy, so-called core prices rose 1.4 percent after a 1.8 percentgain in the prior quarter.
A bright spot was higher personal income that offered hope for stronger consumerspending in the second quarter. The increase in disposable personal income --income adjusted for inflation and taxes -- more than doubled to 1.9 percent. Thesavings rate fell.Federal spending rebounded following the partial government shutdown in the
fourth quarter.The report is the first of the department's three estimates on first-quarter growth.More recent data has pointed to the economy bouncing back in the current secondquarter."In short, weak growth and tame inflation, with growth even weaker than expectedbased on the monthly data," said Jim O'Sullivan, chief US economist at High
Frequency Economics.But he said the monthly data have also signaled a pickup in growth later in thequarter and as the second quarter began."The pattern is consistent with the weakening being due in large part to weathereffects and other sources of volatility rather than fundamental deterioration.