The US economy contracted slightly in the first quarter as it struggled with bad weather, a strong US dollar, spending cuts in the energy sector and disruptions at West Coast ports.
However, there are signs that growth is accelerating in the second quarter as the temporary drag from unusually heavy snowfalls and the ports dispute fade. Retailers reported strong sales last month and employers stepped up hiring. Housing is also firming.
The US Department of Commerce yesterday said that GDP fell at a 0.2 percent annual rate in the January-March quarter instead of the 0.7 percent pace of contraction it reported last month.
A fairly stronger pace of consumer spending than previously estimated accounted for much of the upward revision. Consumer spending, which accounts for more than two-thirds of US economic activity, was revised up to 2.1 percent growth pace from the 1.8 percent rate reported last month.
With personal savings increasing at a robust US$720.2 billion pace, consumer spending could accelerate in the second quarter.
While export growth was revised higher, that was offset by an upward revision to imports, leaving a still-large deficit that subtracted almost 2 percentage points from GDP.
The GDP revision was in line with economists’ expectations. The US economy expanded at a 2.2 percent rate in the fourth quarter last year.
However, the first-quarter slump in output likely is not a true reflection of the economy’s health. Many economists say a problem with the model the government uses to smooth the data for seasonal fluctuations contributes to depressing the GDP number.
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