U.S. growth nearly stalled in the first three months of the year, fresh evidence that the economic expansion that began almost five years ago remains the weakest in modern history.

Gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 0.1% in the first quarter, the Commerce Department said Wednesday. It marked the second-worst quarterly performance since the recession ended in mid-2009.

The weak GDP reading came as Federal Reserve officials voted to continue withdrawing their support for the economy based on the expectation—shared by many private economists—that growth would rebound, as it already started doing as the weather improved. "Economic activity has picked up recently, after having slowed sharply during the winter in part because of adverse weather conditions," the central bank said in its policy statement Wednesday.

Harsh weather likely slowed first-quarter business investment and discretionary consumer spending. It could have even blocked exports—which notched their sharpest decline since the recovery began—from reaching ports.

 

Pent-up demand caused by a winter lull could lead to a stronger gains this spring and summer, and reassure the Fed that the economy can return to the stronger growth trajectory established in the second half of last year, when it expanded at a 3.4% pace.

Against the optimistic backdrop, U.S. stocks climbed. The Dow Jones industrials added 45.47 points, or 0.3%, to close at a record 16580.84.

Still, the first-quarter reading fell far below even the lackluster average annual gain of near 2% since the recession ended. While some easing was broadly expected, the severity of the first-quarter slowdown surprised many economists, who forecast a growth at a 1.1% rate in a Wall Street Journal survey.

The latest GDP figures "can't possibly be reflective of the state of the economy," said John Ryding, chief economist at RDQ Economics LLC. Recent data on employment and business-equipment spending indicate the economy is growing at faster pace, he said.

Forecasting firm Macroeconomic Advisers projects the economy will grow at a 3.5% rate in the second quarter and expects growth in that vicinity for the rest of the year.

The cold winter chilled sales for Positec Tool Corp., a Charlotte, N.C.-based maker of garden equipment and power tools that retail under the Rockwell and Worx brand names.

Positec's sales were on "a really good glide path" before hitting turbulence over the winter months, said Chief Executive Tom Duncan. Gardening equipment sales in particular were down "in the low double-digit negatives," he said. Still, he's optimistic the company will "get back on a pretty steady growth curve" this spring.

The primary driver of the latest weaker-than-expected growth figure: Exports fell at the fastest rate since the recession ended, declining at a 7.6% pace in the first quarter. The performance partly reflects shaky economies in Europe and Asia generating poor demand, rather than underlying weakness in the U.S.

Cleveland-based Lincoln Electric Holdings Inc., LECO +2.60% which makes welding machines, saw its sales fall 5% in the first quarter, in large part due to weaker demand from China, Russia and the Middle East. "The most notable volume weakness was in our North American equipment business and primarily in exports, which we attribute to lower international industrial demand," Chief Executive Chris Mapes told analysts last week.

 

Cold weather also could have played a role in tumbling exports, said Jason Thomas, director of research at the Carlyle Group. Reports from the private-equity firm's 200 portfolio companies indicate about half that drop in exports could be attributed to shipments failing to reach U.S. ports due to weather delays, boosting the prospects for a spring pickup.

"We had the best backdrop for growth entering a year since 2007," Mr. Thomas said. "I think it's likely that we'll still get the growth rate we expected."

Wednesday's report showed the pace of consumer spending on goods rose at a mere 0.4% during the quarter. That was the smallest gain since 2011, a sign of fewer discretionary purchases.

But households spent more on services, including energy to heat homes and health care, causing total consumer spending to rise at a 3.0% pace, only slightly below the fourth quarter's 3.3% rate.

If not for the increased spending on health care and utilities, the economy would have contracted in the first quarter. Medical spending rose at a time when millions of Americans were enrolling in insurance plans created under the new health-care law.

A woman prepares to pay for her order at a Chick-fil-A restaurant in Bowling Green, Ky. Bloomberg

Residential fixed investment—spending on home building and improvements—declined at a 5.7% rate in first quarter. Cold weather likely halted some building. But other factors, including mortgage rates that are a percentage point higher than a year earlier, could be dissuading families from moving.

Business spending on equipment fell at a 5.5% pace in the first three months of the year. That was the largest decline since 2009. The slowdown in investment coincided with weaker hiring during the quarter.

Bob Zakreski, owner of Minooka Pastry Shop in Scranton, Pa., said sales for high-end items such as wedding cakes continue to decline years after the recession ended. Until he's more confident about the economy, he's putting off a purchase of a $30,000 industrial dishwasher. "We're patching up the one that we have and will try to keep it running as long as we can," Mr. Zakreski said.

While Fed policy makers weren't fazed by the latest growth figures, they remain concerned about weak inflation.

A separate Labor Department report Wednesday showed the employment-cost index, a broad measure of pay and benefits, rose a seasonally adjusted 0.3% from January through March. That was slower than the 0.5% gain in the fourth quarter of 2013.

The slight increase reflects weak inflationary pressures across the economy. Small compensation gains can allow businesses to more easily forgo price increases, but they also can stifle consumer demand.

At the same time, persistently low inflation—remaining well below the central bank's 2% annual target—could complicate the Fed's decisions about how to wind down its bond-buying program this year and when to raise benchmark interest rates.

For now, the Fed maintained its previous path of reducing bond purchases to $45 billion a month, while reaffirming that it expects to keep short-term interest rates near zero "for a considerable time."

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com and Eric Morath ateric.morath@wsj.com