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The winter freeze in the economy was deeper than we thought. That's the message from a GDP report from the government today. It shows economic growth nearly stalled out in the first few months of the year. But most economists and Fed policymakers believe the economy is already bouncing back. Investors seem to agree. The Dow hit a record high today.

NPR's John Ydstie has more.

JOHN YDSTIE, BYLINE: During January and February, much of the U.S. was clobbered by one winter storm after another. Everyone thought it was taking a big toll on economic activity and analysts predicted the annual growth rate had shrunk to around one percent. But today, the government reported it was worse than that. In fact, the data showed the economy grew at just one-tenth of one percent. Paul Edelstein, director of financial economics at IHS Global, says one reason was a big hit to residential construction.

PAUL EDELSTEIN: The how the market has been, you know, plagued by a number of problems, weather being one of them. But exports were down after some really strong growth last year and we didn't get much help from the government, either.

YDSTIE: Edelstein says the bad weather probably delayed some state and local government spending on building projects. It's also likely that storm related transportation delays helped undermine exports, though weakness in foreign markets, including China, was probably a bigger factor. But Edelstein expects exports to rebound.

EDELSTEIN: Our view is that China has probably bottomed and probably will see a pickup in growth very slowly over the course of the year and that should support U.S. exports.

YDSTIE: Ian Shepherdson of Pantheon Macro Economics agrees, and he says today's report on growth in the first three months of the year is a bit like looking at a winter storm in the rearview mirror.

DR. IAN SHEPHERDSON: We do have some evidence already that the weather effect is unwinding because we got quite a bit of the March data now, and the retail sales and doable goods and industrial production figures were much, much better than we saw during the severe stormy months.

YDSTIE: That is the conclusion of Federal Reserve policymakers, too. At the end of their two-day meeting in Washington, they issued a statement noting that growth in economic activity has picked up recently. Edelstein says the Fed should get some credit for predicting this scenario.

EDELSTEIN: The Fed's view has been that the weakness we've seen recently is weather-related and that's turned out to be fairly true. And they expect economic growth and activity to pick up over the course of the year and we're already starting to see it.

YDSTIE: Including a report today that showed business hiring grew by 220,000 in April. The government's official report comes on Friday. Today, Fed policymakers also continued dialing back their bond buying stimulus program, reducing purchases by another $10 billion, to 45 billion a month. They also reiterated their intention to keep short-term interest rates low for a considerable time, even after ending their monthly bond purchases.

One other note, the otherwise gloomy growth report for the first quarter had one strangely strong component, a big jump in consumption. But it wasn't because shoppers braved the weather to get to the malls; it was because more people went to see their doctor and got treated in hospitals. Ian Shepherdson says the surge coincided with the beginning of insurance coverage under the Affordable Care Act.

SHEPHERDSON: So it looks as though the advent of Obamacare and the provision of insurance to people who previously didn't have it has unleashed demand for health care services that simply wasn't there before.

YDSTIE: In fact, spending on health care grew in the first three months of the year at an astonishing annual rate of nearly 10 percent.

John Ydstie, NPR News, Washington.

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