US economy shrinks in first quarter
Jobless claims fall; inventories, trade weigh on the economy
Employees at a factory in St Louis. the US government on Thursday issued a revised estimate of GDP growth in the January-march quarter. — AP
The US 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 revised down its growth estimate to show gross domestic product shrinking at a one per cent 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.
GDP growth was initially estimated to have expanded at a 0.1 per cent 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 in output, which also reflected a plunge in business spending on nonresidential structures, was sharper than Wall Street’s expectations for a 0.5 per cent contraction pace.
The economy grew at a 2.6 per cent pace in the fourth quarter. US Treasury debt yields fell slightly on the report, while US stock index futures trimmed gains. The dollar fell against the euro. But the decline in output does not appear to have persisted into the second quarter and the factors that held down the economy are temporary.
The economy should rebound strongly as they fade. Economists estimate severe weather could have chopped off as much as 1.5 percentage points from GDP growth. The government, however, gave no details on the impact of the weather.
Jobs market firming
In a separate report the Labour Department said first-time applications for state unemployment benefits declined 27,000 to a seasonally adjusted 300,000 last week. The four-week moving average for new claims, considered a better measure of underlying labor market conditions as it irons out week-to-week volatility, hit its lowest level since August 2007. That added to signs of strength in the jobs market.
Other data such as manufacturing have buoyed hopes of a strong rebound in growth in the second quarter.
Businesses accumulated $49.0 billion worth of inventories in the first three months of the year, far less than the $87.4 billion estimated last month.
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