The U.S. economy contracted in the first quarter for the first time in
three years as it buckled under the weight of a severe winter, but there
are signs activity has since rebounded.
The Commerce Department on Thursday slashed its estimate of gross domestic product to show the economy shrank at a 1.0 percent annual rate.
The worst performance since the first quarter of 2011 reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit. Both are temporary factors which should fade and unleash a surge in growth this quarter.
“The race isn't over yet for the economy. We are still expecting a strong finish to the year. Inventory levels will rebuild, pushing GDP to nearly 4 percent in the second quarter,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
GDP was initially estimated to have grown at a 0.1 percent rate. It is not unusual for the government to make sharp revisions to GDP numbers as it does not have complete data when it makes its initial estimates.
The decline also reflected a plunge in business spending on nonresidential structures. The economy grew at a 2.6 percent pace in the fourth quarter.
Read more: U.S. economy shrinks in first quarter amid severe weather - chicagotribune.com
The Commerce Department on Thursday slashed its estimate of gross domestic product to show the economy shrank at a 1.0 percent annual rate.
The worst performance since the first quarter of 2011 reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit. Both are temporary factors which should fade and unleash a surge in growth this quarter.
“The race isn't over yet for the economy. We are still expecting a strong finish to the year. Inventory levels will rebuild, pushing GDP to nearly 4 percent in the second quarter,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
GDP was initially estimated to have grown at a 0.1 percent rate. It is not unusual for the government to make sharp revisions to GDP numbers as it does not have complete data when it makes its initial estimates.
The decline also reflected a plunge in business spending on nonresidential structures. The economy grew at a 2.6 percent pace in the fourth quarter.
Read more: U.S. economy shrinks in first quarter amid severe weather - chicagotribune.com
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