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| US GDP shrinks 2.9% in first quarter | US GDP shrinks 2.9% in first quarter |
| (35 minutes later) | |
| The US economy suffered its worst performance for five years in the first quarter of 2014, latest figures show. | The US economy suffered its worst performance for five years in the first quarter of 2014, latest figures show. |
| The economy shrank at an annualised rate of 2.9% in the first three months of the year, the third estimate from the US Commerce Department showed. | The economy shrank at an annualised rate of 2.9% in the first three months of the year, 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. | This was worse than the previous estimate of a 1% contraction, and also worse than economists' expectations. |
| However, the economy is expected to have recorded a sharp recovery during the second quarter of the year. | However, the economy is expected to have recorded a sharp recovery during the second quarter of the year. |
| Spending downgrade | Spending downgrade |
| The unusually cold weather in the first quarter of the year has been blamed for the poor performance of the economy. | The unusually cold weather in the first quarter of the year 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. | 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. | 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. | 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%. | Trade was also a bigger drag on the economy than previously thought, with exports falling by 8.9% rather than a previously estimated 6%. |
| 'Temporary setback' | 'Temporary setback' |
| The first quarter figures are all the more startling as the economy grew by 2.6% in the final three months of 2013. | The first quarter figures are all the more startling as the economy grew by 2.6% in the final three months of 2013. |
| But economists said more recent unemployment, manufacturing and service sector data all pointed to a sharp turnaround in the second quarter. | But 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. | Analysts have forecast the economy could bounce back by as much as 4% in the second quarter. |
| Stuart Hoffman, chief economist at PNC Financial, said: "We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter." | Stuart Hoffman, chief economist at PNC Financial, said: "We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter." |
| Mark Zandi, chief economist at Moody's Analytics, said: "We should have a much better second half this year and a much better 2015 than 2014." | Mark Zandi, chief economist at Moody's Analytics, said: "We should have a much better second half this year and a much better 2015 than 2014." |
| Last week, the US Federal Reserve cut its growth forecast for 2014 because of the harsh winter weather. | |
| The central bank 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 bank noted that economic activity had "rebounded in recent months". |