WASHINGTON (6/26/14)--Real gross domestic product (GDP) officially flopped in the first quarter with a 2.9% tumble, according to a second revision of the quarter by the U.S. Bureau of Economic Analysis, released Wednesday.
The agency's initial estimate was a 0.1% increase, followed last month by a revised 1% contraction.
"The first quarter was a disaster for the U.S. economy, as it contracted severely," said Scott Hoyt, Moody's analyst (Economy.com June 25). "Fortunately most of the decline was because of factors that were either temporary or onetime events."
The nearly 3% pull-back marked the largest drop since 2009 and the largest during a period of prolonged economic expansion since the tail end of World War II (MarketWatch June 25).
Hoyt said the drop was fueled by severe winter weather, the expiration of the U.S. emergency unemployment program, slower inventory accumulation and a temporary poor economic period overseas.
The lack of consumer spending also played a key role in the contraction, especially in health-related spending, which sank by $6.4 billion instead of swelling by $39.9 billion, as the government had anticipated.
Weak inventory investment and final sales totals also dragged down the economy in the first quarter.
Gross domestic income, another marker of the health of the economy, shrank 2.6% after a 2.6% jump in the fourth quarter of 2013.
Moving forward, as the second quarter comes to a close, the impact of these factors should fade and the economy should rebound, Hoyt said, adding that real GDP growth now hovers above 3%.
Many economists expect the economy to grow by 3.6% in the second quarter, according to MarketWatch.
"Since the recovery began five years ago, real GDP has grown about 2% per year," Hoyt said. "Growth should accelerate to above 3% for the remainder of the year and through much of 2015. Although the economy hit a deep pothole in the first quarter, this outlook remains intact."