GDP report: Economic growth chilled in first quarter

WASHINGTON - The U.S. economy skidded to a near halt in the first three months of the year, battered by a triple whammy of harsh weather, plunging exports and sharp cutbacks in oil and gas drilling.

The overall economy grew at a barely discernible annual rate of 0.2 percent in the January-March quarter, the Commerce Department reported Wednesday. That is the poorest showing in a year and down from 2.2 percent growth in the fourth quarter.

Plummeting exports pulled growth down by nearly a full percentage point. The category that includes investments in oil and gas exploration drilling plunged 48.7 percent. Consumer spending slowed sharply as a severe winter kept shoppers home.

The tiny increase was much worse than economists had expected, but analysts are still looking for a solid rebound for the rest of the year.

The numbers were "even weaker than expected," Jim O'Sullivan, chief U.S. economist at High Frequency Economics, wrote in a note. "We believe weakness was grossly exaggerated and there will be significant catch-up in Q2, but, of course, that remains to be seen."

The government's first look at overall economic growth for the first quarter, as measured by the gross domestic product, came as the Federal Reserve wrapped up two days of discussions on interest rate policies. The weak performance will delay any interest rates increases, analysts said.

"A stalling of U.S. economic growth at the start of the year rules out any imminent hiking of interest rates by the Fed," Chris Williamson, chief economist at Markit, wrote in a research report.

Economists are hopeful that growth will rebound this spring and summer. They are predicting that solid employment gains and rising consumer spending will help spur stronger growth.

The Fed is expected to acknowledge the economic slowdown in the statement it issues later Wednesday, while at the same time emphasizing its belief that the factors responsible were largely temporary.

At the Fed's March meeting, the central bank opened the door to a rate increase this year by no longer saying it would be "patient" in moving to raise interest rates. While economists had thought the change could mean the Fed might hike rates for the first time at the June meeting, the view now is that the weaker economic activity has pushed off the first rate increase until at least September.

Many economists forecast growth to rebound to around 3 percent in the current quarter and hold steady in the second half of the year.

The International Monetary Fund earlier this month projected that the U.S. economy would grow 3.1 percent this year. While that is a half-point lower than its January forecast, it would still give the United States the strongest annual growth since 2005, two years before the country fell into the worst recession since the 1930s.

The Great Recession ended nearly six years ago in June 2009, but growth since the recovery began has been sub-par, averaging just 2.2 percent. Despite the weak start, analysts believe 2015 will be the year when growth accelerates to a more respectable level.