US Q1 GDP Falls 1% In First Such Drop Since 2011 As Severe Winter Stuns Economy

Real GDP per Capita Through 2013
Economist Robert Gordon predicts that U.S. GDP growth in the next few decades will fall from its past average. Robert Gordon

An unusually severe winter caused the U.S. economy to shrink in the first quarter, in the first such contraction since 2011, according to revised government data released on Thursday.

The Commerce Department had initially reported that first-quarter economic growth rose 0.1 percent.

The decrease in real GDP in the first quarter primarily reflected negative contributions from private inventory investment, exports, nonresidential fixed investment, state and local government spending, and residential fixed investment that were partly offset by a positive contribution from personal consumption expenditures.  Imports, which are a subtraction in the calculation of GDP, increased, the Commerce Department noted on Thursday.

Analysts say the first-quarter contraction is not a harbinger of tough economic times.

"For those worried about a recession, it's worth remembering that employment increased by nearly 300,000 in April and jobless claims dropped to 300,000 last week. Those numbers point to a recovery gathering some real momentum at last. We still expect second-quarter GDP growth to come in close to 3.5 percent," Paul Ashworth, chief U.S. economist with Capital Economics, said in a note.

 

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