Sunday, June 1, 2014

US economy contracted in first quarter of 2014

Some grim stats on the U.S. economic growth slowdown in a short BBC article.
The US economy shifted into reverse in the first three months of 2014 shrinking by an annualised rate of 1%, official estimates have shown.
It is the worst economic performance since the first quarter of 2011.
It is also a big fall on the 2.6% rise in economic output in the final quarter of last year.
The US Commerce Department's first reading of gross domestic product (GDP) showed the economy grew at an annualised rate of just 0.1%.
The fall in output was blamed on an unusually cold and disruptive winter - one of the coldest in the US for 20 years - and a plunge in business investment.
Economists estimate the weather could have cost up to 1.5 percentage points of GDP.
However, the Commerce's Department's report did not estimate the effect of the winter weather.
The fall was also twice as big as economists expected.
Most Wall Street analysts had forecast the economy to contract by around 0.5%.
But the Commerce Department said there was already evidence that the economy was rebounding, with data ranging from employment to manufacturing activity already pointing to a sharp acceleration in economic activity in the second quarter.
Tumbling exports, while not as severe as initially thought, combined with stronger imports in the first quarter resulted in a larger than expected trade deficit which shaved 0.95 percentage points off US economic output.
Consumer spending, which accounts for more than two-thirds of US economic activity, increased by 3.1%, which was revised up slightly from 3% in the first estimate.
Business spending on non-residential structures, such as gas drilling, fell by 7.5%. It had previously been reported to have increased by 0.2% .
The report showed corporate pre-tax profits also plunged 13.7% in the first quarter, the biggest drop since the fourth quarter of 2008.
The White House said the GDP revision was subject to a number of notable influences, including the severe winter weather, which temporarily lowered growth.
It added: "The President will do everything he can either by acting through executive action or by working with Congress to push for steps that would raise growth and accelerate job creation, including fully paid-for investments in infrastructure, education and research, a reinstatement of extended unemployment insurance benefits, and an increase in the minimum wage."


  1. It is crazy to me to think about how big of an impact the winter had on our economy. I do not think that these statistics about contraction and slowdown reflect underlying/fundamental problems with our economy. The recovery seems to be doing better - the winter just slowed it down a bit but still we are moving in a better direction I think.

  2. Sanjay, I agree with you in that something like the weather can have a large impact on the economy. I am also interested to see how are imports and exports will fare over the next couple of quarters.

  3. I also agree with both Mark and Sanjay, we are still moving in the positive direction, but we just found an obstacle (weather) that made it more difficult to keep the same speed that we had before.

  4. It surprised me as well that the weather had such a large impact on the economy. Hopefully things will pick up again now that the winter is over. I also think long term unemployment, income inequality, and people leaving the labor force are major causes of of the slow economic growth we've had over the last couple of years.

  5. I agree with the above posters. In addition to the fact that the weather played a large role in slowing the economy over the winter, we cannot expect positive growth every quarter. I am optimistic that the U.S. economy is heading in the right direction.