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 Gross domestic product probably grew at a 1.2 percent annual rate,
according to a Reuters survey of economists, pulling back from the
fourth quarter's 2.6 percent pace.
An abrupt slowdown in export growth and a less rapid pace of
restocking by businesses are expected to have added to the drag from
the weather.
U.S. financial markets and Federal Reserve officials are likely to
brush aside the slowdown in growth, given the temporary factors at
play, and focus on recent data suggesting strength at the tail end
of the quarter.
"We have effectively written off first-quarter growth performance in
part due to the adverse weather conditions," said
Millan Mulraine, deputy chief economist at TD Securities in New
York. "With underlying momentum remaining favorable we continue to
anticipate a meaningful rebound in the second quarter."
The Commerce Department will release its first snapshot of
first-quarter GDP at 8:30 a.m. EDT on Wednesday, just hours before
the Fed wraps up a two-day policy meeting.
Fed officials, who have already dismissed the first quarter as being
compromised by the weather, are expected to announce a further
reduction in the amount of money they are pumping into the economy
through monthly bond purchases.
"They will shrug off the report and continue to stress that the
outlook is bright and that economy is poised to accelerate going
forward," said Thomas Costerg, a U.S. economist at Standard
Chartered Bank in New York.
FEWER ORDERS AT FACTORIES
Severe weather may have chopped off as much as 1.4 percentage points
from GDP growth. After aggressively restocking in the second half of
2013, businesses have been accumulating inventory at a moderate
pace.
That has resulted in manufacturers receiving fewer orders.
Trade also likely undercut growth, partly because of the weather,
which left goods piling up at ports.
Together, inventories and trade are forecast to slice off at least
one percentage point from GDP growth.
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The economy's fundamentals, however, likely remained solid. A
measure of domestic demand that strips out exports and inventories
is expected to have accelerated from the fourth quarter's tepid 1.6
percent pace.
Consumer spending, which accounts for more than two-thirds of U.S.
economic activity, probably slowed from the fourth-quarter's brisk
3.3 percent pace as freezing temperatures reduced foot traffic to
shopping malls.
But demand for heating likely tempered the deceleration. Economists
said the weather also likely undercut business spending on
equipment, but investment in nonresidential structures, such as gas
drilling, probably rebounded.
Investment in home building is expected to have contracted for a
second straight quarter, in part because of the weather. But a rise
in mortgage rates over the past year has also hurt.
A second quarter of contraction in spending on home building would
suggest a housing recession, which could raise some eyebrows at the
U.S. central bank. A bounce back is, however, expected in the
April-June period.
"It's a surprise that housing is actually a drag on GDP, but I don't
think you will see another contraction," said Costerg.
(Reporting by Lucia Mutikani; editing by Meredith Mazzilli)
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