U.S. economy stumbles in first-quarter, but prospects brighter
By Lucia Mutikani
WASHINGTON (Reuters) - The U.S. economy contracted for the first time in three years in the first quarter as it buckled under a severe winter, but there are signs it has rebounded and economists say it could grow as much as 4 percent in the current quarter.
The Commerce Department on Thursday slashed its estimate of gross domestic product to show the economy shrank at a 1.0 percent annual rate.
The worst performance since the first quarter of 2011 reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit.
These weather-related temporary factors should fade. Inventories, in particular, are expected to swing higher, boosting output in the April-June quarter.
"The race isn't over yet for the economy. Things are better than you think. We are still expecting a strong finish to the year," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.
GDP was initially estimated to have grown at a 0.1 percent rate. It is not unusual for the government to make sharp revisions to GDP numbers as it does not have complete data when it makes its initial estimates.
A plunge in business spending on commercial property and plant was also a drag. Economists estimate severe weather could have chopped off as much as 1.5 percentage points from GDP growth. The economy grew at a 2.6 percent pace in the fourth quarter.
U.S. stocks were trading higher as investors focused on the brighter second-quarter growth prospects. Prices for U.S. Treasury debt rose, but the dollar fell against a basket of currencies. Continued...