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US economy shrank in first quarter | US economy shrank in first quarter |
(35 minutes later) | |
The US economy shrank 0.7% in the first three months of 2015, compared to the same period last year. | The US economy shrank 0.7% in the first three months of 2015, compared to the same period last year. |
The Bureau of Economic Analysis significantly revised down its earlier economic growth estimate of 0.2%. | The Bureau of Economic Analysis significantly revised down its earlier economic growth estimate of 0.2%. |
The previous calculation underestimated the rise in the volume of imported goods and overestimated capital investment by companies, it said. | The previous calculation underestimated the rise in the volume of imported goods and overestimated capital investment by companies, it said. |
The US economy last contracted in the first quarter of 2014, when it shrank by 2.1%. | The US economy last contracted in the first quarter of 2014, when it shrank by 2.1%. |
As was the case last year, a harsh winter may have been partly to blame for falling goods and services production in the US. | As was the case last year, a harsh winter may have been partly to blame for falling goods and services production in the US. |
Consumer spending, which accounts for about 70% of economic activity, slowed to 1.8% growth in the first quarter, slightly below the 1.9% growth initially estimated. | Consumer spending, which accounts for about 70% of economic activity, slowed to 1.8% growth in the first quarter, slightly below the 1.9% growth initially estimated. |
The Bureau also highlighted the impact of weak exports and government spending. | The Bureau also highlighted the impact of weak exports and government spending. |
'Second quarter pick-up' | |
The strong US dollar has pushed up imports and lowered exports. At current dollar prices, GDP slipped further from 0.1% growth to a 0.9% contraction. | The strong US dollar has pushed up imports and lowered exports. At current dollar prices, GDP slipped further from 0.1% growth to a 0.9% contraction. |
The revision in GDP prompted investors to shift to traditionally safer assets, such as bonds. This is why yields on US Treasuries have fallen as their price has risen. | The revision in GDP prompted investors to shift to traditionally safer assets, such as bonds. This is why yields on US Treasuries have fallen as their price has risen. |
GDP figures are closely watched by investors, as the Federal Reserve makes decisions based on the health of the economy. | |
"From a policy perspective, the first quarter lull is already history; it's the extent of the rebound that will be critical in determining the timing of the Fed's first move on interest rates," says Chris Williamson, chief economist at Markit. | |
"Survey evidence is already pointing to a second quarter pick-up," he added. |