US economy contracts in first quarter, first time in three years

The US economy saw a contraction in the first quarter for the first time in three years, as economic activity took a hit by harsh weather caused business disruption and slowed construction, Market Watch reported. T

he damage though, seemed to be fading fast amid widespread signs that growth had accelerated in the spring.

Gross domestic product, the sum of all goods and services produced by the economy, shrank by annual pace of 1 per cent in the first three months of 2014, the commerce department said Thursday. The government had initially reported last month that GDP was up at a seasonally adjusted 0.1 per cent rate.

Much of the economic activity that had been delayed or disrupted in the first quarter, however, appeared to have shifted to the  warmer spring months, according to several  recent reports.

Also consumer spending stood at over 3 per cent for the second straight quarter, a sure sign that Americans were feeling more confident about the health of the economy and their ability to find a job.

According to Wall Street expectations, second-quarter economic growth would snap back with a 3.8 per cent gain, a MarketWatch survey projected, and many analysts saw expansion at  a healthy 3 per cent  through the second half of the year.

The Wall Street Journal quoted Economist Intelligence Unit analyst Mike Jakeman as saying there was no disguising that the first quarter was grim for the economy and was an unwelcome bump in the road to economic recovery.

However, he added the company remained confident that the economy would bounce back strongly in the second quarter.

Government economists had previously projected slowing of GDP to 0.1 per cent growth rate as harsh weather conditions hit economic activity in the quarter.

The newly revised estimate incorporated additional economic data released in recent weeks with higher-than-expected imports and slower-than-expected inventory growth dragging the economy into negative territory.

But the weakness of the first quarter "was clearly exaggerated, particularly by weather effects," High Frequency Economics chief US economist Jim O'Sullivan said in a note to clients.

O'Sullivan along with other economists is predicting a strong bounce back in the US economy in the second quarter, though it was not clear how strong of a rebound was likely.