US GDP in surprise slump in Q1 2014
According to latest figures, the US economy suffered its worst performance for five years in Q1 2014.
The US economy shrank at an annualized rate of 2.9% in Q1 2014, the third estimate from the US Commerce Department showed.
This was worse than the previous estimate of a 1% contraction, and also worse than economists’ expectations.
However, the US economy is expected to have recorded a sharp recovery during the second quarter of the year.
The White House said the figures showed the economic recovery was still in progress, but added other indicators for April and May suggest a rebound in the second quarter.
The US economy shrank at an annualized rate of 2.9 percent in Q1 2014
The unusually cold weather in the first quarter of 2014 has been blamed for the poor performance of the economy.
However, the gap between the second and third estimates of US growth for the quarter was the largest on record.
The latest revision came as a result of a weaker pace of healthcare spending than previously assumed, which caused a downgrading of the consumer spending estimate.
Consumer spending – which is responsible for more than two-thirds of US economic growth – increased by 1% in the quarter, rather than the 3.1% rate as first estimated.
Trade was also a bigger drag on the economy than previously thought, with exports falling by 8.9% rather than a previously estimated 6%.
Q1 2014 figures are all the more startling as the economy grew by 2.6% in Q4 2013.
However, economists said more recent unemployment, manufacturing and service sector data all pointed to a sharp turnaround in the second quarter.
Analysts have forecast the economy could bounce back by as much as 4% in the second quarter.
Last week, the Federal Reserve cut its growth forecast for 2014 because of the harsh winter weather.
The Fed is now predicting growth of between 2.1% and 2.3% for this year, down from its March forecast of 2.8% to 3%.
However, in its accompanying statement, the central bank noted that economic activity had “rebounded in recent months”.
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