Apr 28, 3:36 PM EDT

US economy barely grew at the start of election year, as consumers, businesses turn cautious


AP Photo
AP Photo/Lynne Sladky

Latest Business News
Lower oil prices push Exxon's 1Q profit down by 63 percent; weakest quarter since 1999

Stocks are sinking again on Wall Street, led by declines in health care and technology

Valeant Pharmaceuticals has filed its long-overdue financial report for 2015, plus restated results for several quarters

Whole Foods exec says no tattoo parlors are in the works for company's offshoot "365" grocery chain

Abbott Laboratories will spend $25 billion to buy St. Jude Medical Inc. in a cash-stock deal that aims to strengthen the medical device maker's share of the market for cardiovascular care

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Puerto Rico's governor says the U.S. territory is bracing for multiple lawsuits as a major default over a bond payment looms

The eurozone economy has grown back to the size it was back in 2008 _ here's a look at some other key indicators for the 19-country bloc, comparing its situation eight years ago with where it is now

Official figures show that the eurozone economy grew by a quarterly rate of 0.6 percent in the first three months of year, a level of growth that means the single currency bloc has finally clawed back the ground lost during the recessions since 2008

US economy barely grew at the start of election year, as consumers, businesses turn cautious

Japan's central bank stunned financial markets Thursday with a decision not to splash out still more monetary stimulus for the ailing economy _ apart from zero-interest loans for an earthquake zone

The head of global financial forum warned Britain that leaving the European Union would be tantamount to taxing its citizens _ another in a growing cavalcade of warnings ahead of a June 23 referendum on membership in the 28-nation bloc

A closely watched survey shows German consumer confidence is on the rise, indicating there is an expectation the economy, Europe's largest, will regain momentum in the coming months

South Korea's economy has expanded at its slowest pace in three quarters

The International Monetary Fund says oil exporting countries in the Middle East lost $390 billion in revenue due to lower oil prices last year, and should brace for losses of around $500 billion this year

Egypt's currency is plunging to new lows on the black market amid speculation it will be officially devalued further

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

WASHINGTON (AP) -- It was not a great start for the U.S. economy.

With consumers and businesses turning cautious, the U.S. struggled to grow in the first three months of a presidential election year that is shining the spotlight on the economy's fitful recovery.

Gross domestic product, the broadest measure of economic health, expanded at a paltry annual rate of 0.5 percent in the January-March quarter, the Commerce Department reported Thursday. That is slower than the fourth quarter's 1.4 percent growth rate and marks the weakest performance in two years.

The good news is that American employers are still adding plenty of jobs, which is expected in the months ahead to fuel an economy that's still outshining much of the world. But if the global slump deepens, or if jobs lose momentum, it could turn Election Day into a pivotal referendum on the economy.

The poor start to the year did not escape notice among Republicans hoping capture the White House in November.

"Today's report showing the weakest period of economic growth in two years is the latest sign the Obama economy isn't working," said Republican National Committee Chairman Reince Priebus. "Hillary Clinton wants to double down on his failed agenda."

Democrats said GDP should strengthen going forward, with the country continuing to enjoy the longest stretch of private sector job growth on record. The U.S. has added 14.4 million jobs over the last 73 months.

Jason Furman, chairman of Obama's Council of Economic Advisors, said the GDP report showed "there's more work to do and the president will continue to call on Congress to support policies that will boost our long-run growth and living standards."

Private economists said that given the severity of the 2007-2009 recession, the debate over the economy is certain to take center stage during campaign season. Democrats will point to a jobless rate at 5 percent - considered close to full employment - and expectations that job growth will continue at a solid monthly pace of at least 200,000 in the months leading up to the election.

But Republicans note that annual GDP growth in this recovery has averaged just above 2 percent. That is the slowest pace in the post-war period. Many middle class families are struggling, especially those who lost jobs in the downturn and have had to take on work at lower salaries.

"How all of this will play out in an election is a big question," said Nariman Behravesh, chief economist at IHS Global Insight. "Why is it that voters are feeling so blue when we have an economy that is close to full employment? Part of the problem is a divide between people with college degrees who are doing fairly well and people with high school degrees who are not doing so well."

The 0.5 percent GDP advance in the first quarter was the weakest showing since GDP contracted by 0.9 percent in the first three months of 2014. It's a familiar pattern in recent years - a weak first quarter followed by a much stronger second quarter figure.

Many economists are forecasting growth will revive in the current April-June quarter to around 2 percent, and strengthen further in the second half of the year.

Part of the first-quarter weakness stems from the turbulence in the stock market at the beginning of the year, which was triggered by worries that China was slowing more than expected.

The market has since recovered all of its early-year losses, China's slowdown now seems less worrisome and oil prices have stabilized and started to rebound. In addition, the U.S. dollar, whose strength had hurt American exporters, has stopped rising and retreated a bit.

Those developments and continued job growth will help bolster the economy in the current quarter and beyond, Behravesh and other analysts said.

But Brian Bethune, an economics professor at Tufts University in Boston, said the rebound could still be derailed if there are not "more positive growth trends overseas."

Consumer spending, which accounts for 70 percent of economic activity, grew at a 1.9 percent rate in the first quarter. That's down from 2.4 percent in the fourth quarter and is the weakest showing in a year.

Business investment dropped at a 5.9 percent rate, the biggest quarterly plunge since the depths of the recession in 2009. The decline was led by a record 86 percent plunge in the category that covers oil and gas exploration. U.S. energy companies have cut back sharply in response to falling global oil prices.

The higher deficit subtracted 0.3 percentage point from growth in the first quarter. A further slowdown in business spending to restock their store shelves also hurt growth.

The Federal Reserve on Wednesday took note of economic weak spots and decided for the third straight meeting to keep its key policy rate unchanged in a range of 0.25 percent to 0.5 percent. Many analysts don't believe there will be a second rate hike until perhaps September after more signs of growth.

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.