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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, a third and final official estimate has shown. The US economy suffered its worst performance for five years in the first quarter of 2014, latest figures show.
The US Commerce Department said the economy shrank by an annualised rate of 2.9% 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.
It was almost double economists' expectations for a fall of 1.7%, This was worse than the previous estimate of a 1% contraction, and also worse than economists' expectations.
A second estimate last month showed the economy shrank by 1%, blaming the unusually cold winter for the fall. However, the economy is expected to have recorded a sharp recovery during the second quarter of the year.
The gap between the second and third estimates is the largest on record. Spending downgrade
Growth in the US economy has now been revised down by 3% since the first estimate. 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.
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.
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'
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.
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."
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."