Shocker cuts to Q1 growth pace show faltering economy

First quarter GDP tracking below 1%
First quarter GDP tracking below 1%   

First-quarter growth is now tracking at just 0.9 percent, after new data showed surprising weakness in consumer spending and a wider-than-expected trade gap.

According to the CNBC/Moody's Analytics rapid update, economists now see the sluggish growth pace based on already reported data, down from 1.4 percent last week. According to the rapid update, economists have a median forecast of 1.6 percent growth in first-quarter GDP, which includes their estimates for data not yet released.

"It's not a polar vortex winter. You can't blame the weather this year. It's the consumer. I think there's a problem with the measurement but at the end of the day if the world were as good as we'd hoped, people would feel better and it's not showing up," said Diane Swonk of DS Economics.

Personal income rose 0.2 percent in February, a tenth above expectations, and spending was up 0.1 percent. But revisions to January's spending data wiped out earlier solid gains and showed spending marginally higher — at 0.1 percent from an earlier 0.5 percent.

Fourth-quarter GDP growth was reported at 1.4 percent Friday, revised up from 1 percent.

Economists had been hopeful the first quarter would show a snapback with growth above 2 percent, and some have been optimistic that weak manufacturing was beginning to show signs of bottoming.

They note the size of the revision to consumer spending is rare.

Read MoreFourth-quarter GDP revised

"It's not falling off the cliff. We're not in a recession but it's consistent with worry," said Swonk.

The February trade gap widened by about a half-billion dollars to — $62.9 billion with both exports and imports higher than expected.

Swonk said she is now forecasting an annualized growth rate for the first quarter of 1 percent or slightly under, from 1.3 percent.

The closely watched Atlanta Federal Reserve's GDPNow forecast model Monday showed a steep drop to a 0.6 percent annualized pace from last week's forecast of 1.4 percent.

The median tracking forecast has fallen by about 1 percent in the past week, a surprising rate of change. But there is other data this week that could positively impact it, such as Friday's March jobs report.

"These GDP (numbers) make no sense. We can count jobs, and job growth is not at all consistent with measured GDP growth," said Mark Zandi, chief economist at Moody's Analytics, in a note.