US GDP growth slows to two-year low

US economic growth slowed surprisingly in the first quarter of the year, falling to an annual rate of 0.5% that was short of the forecast of 0.6%.

Growth in gross domestic product (GDP) in the first quarter of 2016 was a big slowdown from the 1.4% rate enjoyed in the fourth quarter of 2016, the weakest expansion seen for two years.

As usual, the 'advance' estimate from the US Commerce Department is based on source data that are incomplete or likely to be subject to further revision.

Apart from the housing market, all main parts of the economy appeared to slow, with business spending falling at the fastest rate since the second quarter of 2009, dragged 5.9% lower by cost cutting in the energy sector in particular.

Consumer spending growth slumped to 1.9% from 2.4% and exports fell 2.6%.

Economists said the early signs pointed to the slump has extended into the second quarter.

Chris Williamson of Markit said the slowdown between fourth and first quarters meant the US economy grew by just 0.1%, indicating the pace of expansion ground almost to a halt.

“The picture is somewhat confused because the official GDP appear prone to weakening in the first quarter, raising suspicions that the data have not fully accounted for seasonal trends in recent years," Williamson said. "However, survey data indicate that this time the first quarter weakening is not to be brushed off as a statistical quirk."