Gross domestic product, which measures total goods and services output within U.S. borders, dropped at a 6.1 percent annual rate, the Commerce Department said, after shrinking 6.3 percent in the fourth quarter.
Analysts polled by Reuters had forecast GDP falling at a 4.9 percent rate in the January-March quarter. Output has declined for three straight quarters for the first time since 1974-1975.
The advance report from the Commerce Department showed business inventories plummeted by a record $103.7 billion in the first quarter, as firms worked to reduce stocks of unsold goods in their warehouses. That sliced 2.79 percentage points from the overall GDP figure. Excluding inventories, GDP contracted 3.4 percent.
However, declining inventories is a positive development as it suggests the inventory correction cycle might be over. Exports collapsed 30 percent, the biggest decline since 1969, after dropping 23.6 percent in the fourth quarter. The decline in exports knocked off a record 4.06 percentage points from GDP.
Investment by businesses tumbled a record 37.9 percent in the first quarter, while residential investment dived 38 percent, the biggest decline since the second quarter of 1980.
However, there were some bright spots in the report. Consumer spending, which accounts for over two-thirds of U.S. economic activity, rose 2.2 percent, after collapsing in the second half of last year. Consumer spending was boosted by a 9.4 percent jump in purchases of durable goods, the first advance after four quarters of decline.
The Commerce Department said the government’s $787 billion rescue package of spending and tax cuts, approved in February, had little impact on first-quarter GDP. Part of the stimulus package is designed to bolster state and local and government spending, which fell at a 3.9 percent rate in the first quarter, the largest decline since the second quarter of 1981.