The first quarter of this year wasn’t a positive one for the U.S. economy. In fact, it was the least positive it’s been in three years.
For the period between January and March, GDP growth increased at a rate of just 0.7%, a sizable slowing from 2.1% in the fourth quarter of 2016, the Commerce Department reported Friday.
Growth in GDP slowed largely because of a sharp decline in consumer spending—growth in spending was 0.3% in the quarter compared to 3.5% in the fourth quarter, and it was the worst performance in seven years.
In line with that, March retail sales reflected a seven-month low growth rate of just 3.8%. Department store sales fell by 7.75% in the month, also their steepest drop in seven months.
Some economists have attributed the slowdown in consumer spending to shrinking utility bills thanks to warmer weather, a drop-off in auto sales and the IRS’s tardiness in sending out tax refund checks, AP reported.
Either way, the results are hardly in line with Donald Trump’s plans for radically improving the U.S. economy.
“The report will mark a rough start to the administration’s high hopes of achieving 3 percent or better growth, not the kind of news it was looking for to cap its first 100 days in office,” the AP reported Sal Guatieri, a senior economist at BMO Capital Markets, as saying in a note to clients.
In an email addressing the newly released GDP numbers, Ulrik Bie, chief economist of global macroeconomics for the Institute of International Finance, said the first quarter’s meager growth is consistent with patterns over the last decade, but things will improve.
“We expect a pick-up in economic activity in coming quarters—although less buoyant than suggested by confidence indicators,” Bie said. “For the year as a whole, we expect GDP growth of 2.4% followed by 2.5% in 2018 as some fiscal stimulus and positive effects from deregulation sets in.”
The U.K. economy isn’t having its best moment either
Over in the U.K., Brexit hasn’t spelled good news for the country’s economy either.
Economic growth in the U.K. for the first three months of the year was just 0.3%, compared to 0.7% at the end of the fourth quarter last year. It’s the country’s weakest pace of growth in a year, thanks to inflation coming in at a three-year high, which led to weaker retail sales, and the uncertainty surrounding Brexit and upcoming elections haven’t helped—and will likely continue to hurt economic conditions.
“It is increasingly likely that the slowdown in the first quarter is the start of a sustained period of more sluggish growth,” Suren Thiru, head of economics at the British Chambers of Commerce, told the BBC. “Inflation is expected to continue to rise, increasing the squeeze on consumer spending power and firm’s profit margins, pushing growth lower.”