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 Gross domestic product probably expanded at a 1.0 percent annual
rate, according to a Reuters survey of economists. That would be a
step down from the fourth quarter's 2.2 percent pace and mark the
weakest reading in a year.
A strong dollar and a now-resolved labor dispute at normally busy
West Coast ports also likely constrained growth. With both the
weather and the ports dispute out of the way, economists warn
against reading too much into the expected growth slowdown.
"The first quarter is not a true reflection of the health of the
U.S. economy right now, it's not the beginning of a downturn," said
Thomas Costerg, an economist at Standard Chartered Bank in New York.
The Commerce Department will release its snapshot of first-quarter
GDP at 8:30 a.m. (1230 GMT) on Wednesday, just hours before U.S.
Federal Reserve officials conclude a two-day policy meeting.
Policymakers at the central bank are expected to acknowledge the
softer growth, but shrug it off as temporary in a statement they
will issue after their gathering.
While there are signs the economy is pulling out of the soft patch,
data on home building, manufacturing, retail sales and business
investment suggest the rebound will lack the vigor seen last year
when the economy snapped back after being blindsided by cold
weather.
At the start of this year, many economists believed the Fed would
raise interest rates from near zero in June. Now, most of the
guessing centers around September.
"They are looking to see the extent of the bounce back in activity.
It leaves them in waiting mode," said Josh Feinman, chief global
economist at Deutsche Asset & Wealth Management in New York.
HIBERNATING CONSUMERS
Economists estimate unusually cold weather in February chopped off
as much as half a percentage point from first-quarter growth, with
the port disruptions shaving off a further 0.3 percentage point.
The weather impact is expected to be seen in weakness in consumer
spending.
Growth in consumer spending, which accounts for more than two-thirds
of U.S. economic activity, is expected to have slowed sharply after
expanding in the fourth quarter at its quickest pace since early
2006, even though households enjoyed huge savings from a big drop in
gasoline prices.
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"We expect them to spend the windfall in the coming quarters," said
Ryan Sweet, a senior economist at Moody's Analytics in West Chester,
Pennsylvania.
Construction also likely took a hit from the weather.
There were probably other areas of weakness.
Business investment was likely undermined by lower energy prices,
which have cut into domestic oil production.
Schlumberger, the world's No. 1 oil-field services provider, has
slashed its capital spending plans for this year by about $500
million to $2.5 billion, while competitor Halliburton cut its by
about 15 percent to $2.8 billion.
While companies have not given a time frame, economists believe the
bulk of the spending cuts were front-loaded into the first quarter,
and they expect energy-related investment cuts will present less of
a drag on growth in the April-June quarter.
The weather and energy-related spending cuts are expected to have
put a damper on investment in nonresidential structures, which is
expected to have contracted for the first time in two years.
Businesses also likely continued to carefully manage their
inventory, which could result in restocking making no contribution
to growth for a third straight quarter.
The dollar, which gained 4.5 percent against the currencies of the
United States' main trade partners in the first quarter, probably
weighed on trade, as did the West Coast ports dispute.
The dollar is expected to remain an economic headwind in the
quarters ahead. Economists estimate it will reduce growth by 0.6
percentage point this year.
(Reporting by Lucia Mutikani; Editing by Leslie Adler)
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