US cuts QE by $10bn as economy grows 0.1pc

“Information received since the FOMC met in March indicates that growth in economic activity has picked up recently,” it said. Unemployment remains high but “on balance” the labour market improved, and household spending “appears to be rising more quickly,” the committee said.

The pound rose as high as $1.6902 at one stage as investors took the sluggish US growth as a sign that Britain could raise interest rates before the Federal Reserve.

Economists blamed the harsh weather for a lot of the problems that slowed economic growth in the first quarter, including a 5.5pc fall in the amount of money businesses are investing in equipment – the biggest drop in five years.

Companies also spent less on stockpiling “inventory”, or goods to sell further down the line, as they sold off the products they had already stockpiled in the last few quarters.

Meanwhile, spending on new homes fell for the second quarter in a row, declining at a rate equivalent of 5.7pc a year.

There were some bright spots, however, including some upsides to the harsh conditions. The freezing temperatures may have kept many consumers away from the shops, but consumer spending still rose 3pc, as people paid more for housing and utilities such as heating. They also dramatically increased spending on healthcare, as they hurried to enroll in President Obama’s flagship Affordable Care Act – adding the equivalent of a full percentage point to GDP.

Investors had priced in a slowdown in growth of the US economy, albeit not one quite so abrupt, and markets remained relatively calm after the figures were published.

Michael Gapen, managing director of US economic research at Barclays, said: “The expectation was a weak number, and some of the weakness came in the areas we were expecting.”

He pointed to inventories, which increased $87.4bn, compared with spikes of over $100bn in each of the third and fourth quarters.

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