US economy sees weakest growth for three years in first quarter of 2017

GDP grew at an annualised rate of just 0.7 per cent in the first three months of 2017, the worst performance since the first quarter of 2014

Economists believe that spending will rebound (AP)

The American economy turned in its weakest performance in three years in the first quarter of 2017 as consumers sharply slowed their spending.

The US Bureau of Economic Analysis estimated that gross domestic product, the total output of goods and services produced in the economy, grew at an annualised rate of just 0.7 per cent in the first three months of 2017, following an expansion rate of 2.1 per cent in the final quarter of 2016.

The consensus forecast among analysts had been for a 1.2 per cent expansion.

It was the worst quarterly performance since the first quarter of 2014 when the economy contracted at a 1.2 per cent rate.

However, economists warned against reading too much into the data.

"In recent years there is a well-established pattern of GDP growth disappointing in the first quarter and then rallying over the remaining three quarters. Indeed, since 2010, the average for first-quarter growth is only 0.9 per cent, compared with 2.4 per cent in each of the other three quarters," said Paul Ashworth, an economist at Capital Economics.

The Federal Reserve, the US central bank, has previously signalled that it does not read too much into "noisy" quarterly GDP figures and the data is considered unlikely to dissuade the Fed from enacting further interest rate hikes this year.

The central bank lifted its overnight interest rate by 0.25 percentage points in March and has forecast two more hikes this year.

The Q1 GDP slowdown primarily reflected slower consumer spending, which grew at a 0.3 per cent rate, the poorest showing in more than seven years.

Analysts blame that in part on the the unusually warm winter, which meant less spending on gas and electricity bills.

Investment grew at a 4.3 per cent rate, down from a 9.4 per cent rate in Q4 2016.

Overall US GDP grew by 1.6 per cent over 2016 as a whole.

President Donald Trump has pledged to lift the US growth rate to 4 per cent a year.