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2nd LD Writethru: U.S. economy expands at slowest pace in Q1 since 2014

Xinhua, April 28, 2017 Adjust font size:

The U.S. economy grew 0.7 percent in the first quarter of this year, sharply lower than the 2.1 percent growth in the previous quarter, according to the advance estimate released by the Commerce Department on Friday.

The growth was the weakest quarterly performance since the first quarter of 2014.

The sharp slowdown in consumption growth and the downturns in private inventory investment led to the slow growth in the quarter, said the Commerce Department.

Consumer spending, which accounts for about 70 percent of the U.S. economy, increased only 0.3 percent in the quarter, the smallest increase since the fourth quarter of 2009.

Private inventory investment subtracted 0.93 percentage point from the growth in the quarter, compared to a contribution of 1.01 percentage points to the growth in the previous quarter, said the Commerce Department.

However, there are still some bright spots for the economy. Nonresidential fixed investment increased 9.4 percent in the quarter, following a 0.9 percent increase in the fourth quarter of 2016, marking the fastest pace since 2013.

Net exports contributed 0.07 percentage point to the growth in the quarter, compared to a subtraction of 1.82 percentage points in the previous quarter.

The U.S. economy has usually experienced weak performance in the first quarter of each year.

According to Wells Fargo Securities, since year 2000, the growth in the first quarter of each year has averaged at 1 percent, compared with 2.2 percent for the rest of each year.

Analysts widely believe that the weak growth in the first quarter might be a blip, and expect growth to pick up pace in the rest of the year.

Stanley Fischer, vice chairman of the Federal Reserve, said recently that weak growth in the first quarter is a "transitory change," and growth will be around forecasts in the second quarter and the rest of year.

Fed policymakers expected the economy to grow 2.1 percent this year.

Fischer also expected the central bank to still be on track to raise interest rates as planned, but stressed that the Fed is not tied to a total of three rate hikes this year and the actual pace of tightening depends on the data.

According to Fed policymakers' forecast, the central bank still has two more rate hikes this year, after they raised the benchmark interest rate to a range of 0.75-1.0 percent in March. Endi