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U.S. economy contracts 2.9 percent in first quarter


(Reuters) - The U.S. economy contracted at a much steeper pace than previously estimated in the first quarter, but there are indications that growth has since rebounded strongly.

The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, the economy's worst performance in five years, instead of the 1.0 percent pace it had reported last month.

While the economy's woes have been largely blamed on an unusually cold winter, the magnitude of the revisions suggest other factors at play beyond the weather. Growth has now been revised down by a total of 3.0 percentage points since the government's first estimate was published in April, which had the economy expanding at a 0.1 percent rate.

The difference between the second and third estimates was the largest on records going back to 1976, the Commerce Department said.

Economists had expected growth to be revised to show it contracting at a 1.7 percent rate. Sharp revisions to GDP numbers are not unusual as the government does not have complete data when it makes its initial and preliminary estimates.

The latest revisions reflect a weaker pace of healthcare spending than previously assumed, which caused a downgrading of the consumer spending estimate. Trade was also a bigger drag on the economy than previously thought.

The economy grew at a 2.6 percent pace in the final three months of 2013. With the first quarter in the rear view and the April-June period looking stronger, investors are likely to ignore the report.

Data such as employment, manufacturing and services sectors point to a sharp acceleration in growth early in the second quarter. However, the pace of expansion could fall short of expectations, which range as high as a 3.6 percent rate.

Economists estimate severe weather could have slashed as much as 1.5 percentage points from GDP growth in the first quarter. The government, however, gave no details on the impact of the weather.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.0 percent rate. It was previously reported to have advanced at a 3.1 percent pace.

Exports declined at a 8.9 percent rate, instead of 6.0 percent pace, resulting in a trade deficit that sliced off 1.53 percentage points from GDP growth. Weak export growth has been tied to frigid temperatures during the winter.

Businesses accumulated $45.9 billion worth of inventories, a bit less than the $49.0 billion estimated last month. Inventories subtracted 1.70 percentage points from first-quarter growth, but should be a boost to second-quarter growth.

A measure of domestic demand that strips out exports and inventories expanded at a 0.3 percent rate, rather than a 1.6 percent rate.

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jinletren June 25 2014 at 10:16 AM

Politically, the GREATEST thing I ever did was vote FOR Obama in 2008. First Black president. Hope and change. Spread the wealth. Transparency. World peace, Blame Bush. I was even in Lafayette park that night holding up my lighter with the flame of hope shining brightly. Politically, the WORST thing I ever did was vote FOR Obama in 2012. Very little hope and change. Scandal after scandal. Rich getting richer. Poor getting poorer. And, there is absolutely no world peace. Bush not around to blame, can’t help us, now, anyway. And, the first black president, the guy I VOTED for TWICE, just may go down, if not the worst, but, one of the WORST presidents in history. What a shame!

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7 replies
kimmer0310 June 25 2014 at 10:17 AM

The "cold weather" again?

We're in trouble people.

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jrwolfman1 June 25 2014 at 10:20 AM

Blame it on the weather and not the king!

Crock of shiot!

Now he is allowing oil to be exported at a time when our prices at the pump are rising!

This is yet another attempt to cover up their VA, Burgdoh, IRS scandals.

New day, new scandal!

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1 reply
MARTHA & PERRY jrwolfman1 June 25 2014 at 10:27 AM

I read domestic energy production has dropped 75% on federal lands under Obama.

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ectullis June 25 2014 at 10:21 AM

Obsamas agenda is right on track

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2 replies
MARTHA & PERRY ectullis June 25 2014 at 10:28 AM

you mean "left" on track.

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rimit9 ectullis June 25 2014 at 10:48 AM

I would like to see all the slack jawed morons who stared in awe at Obama as though he was the Masiah(sp) explain what they received from the HOPE that was spewed by this imbasil (sp) was it the corruption, was it the scorn from countries that used to be our allies,was it the steady decline in employment, just what was the product of this hope? I know where the change is, it is in my pocket where folding money used to be. All you guys on the left of center really should look at Hillary, same experience, same work background, same ideology.

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bjredmond64 June 25 2014 at 10:26 AM

how can we spend what we dont have? obamacare has screwed a lot of folks, causing higher medical costs. unemployment really isnt getting any better, and as long obama is in office, nothing will actually get better. in fact, i dont think the republicans can do anything better. all of our leaders are leading in the wrong direction.

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Iselin007 June 25 2014 at 10:09 AM

When you outsource your manufacturing jobs you end up repeating the same negative economy over and over again.

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1 reply
caap1 Iselin007 June 25 2014 at 10:30 AM

Thank you Bill Clinton for the policies that allowed that to happen, I told all the UAW fools that live around me that was going to happen when signed NAFTA and granted favored Nation status to China, they all laughed at me and said that no one making squeaky rubber dog toys was going to take away their jobs.

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2 replies
cvanac8550 caap1 June 25 2014 at 10:40 AM

Clinton like Obomber like Bush are all corporate puppets dancing to the tune they are told to play...Anyone who goes after the fed reserve or try's to get to the bottom of the shadow govt...well they will die suddenly..plane crah usually the way ..Lincoln,Mckinley, Kennedy etc...

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Iselin007 caap1 June 25 2014 at 10:53 AM

They tried to replace outsourced manufacturing jobs with duplicate strip malls and box stores to accept all the foreign made crap. Trouble is the duplicate malls and box stores comptete compete for consumers who have low wages When you have too many retail stores then you have an excess capacity chasing the fewer consumers.

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wl2judd June 25 2014 at 10:41 AM

Can anyone doubt that Romney would have been a far superior choice. We are on a slippery slope when all the left can do is slander & vilify.

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buddyboygabe June 25 2014 at 10:30 AM

lowest since recession, an over 55 years ago, within this president's watch, the US credit rating DOWN from 3A's to 2.5A, and China' is over taken US as World economy power, furthermore, national debts going up by the day, under this president, he has added an over $8 Trillions in debts, more than combined previous presidents.

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Jeremiah June 25 2014 at 11:29 AM

Another scandal that continues six years after you-know-who took office.

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caap1 June 25 2014 at 10:33 AM

Yep it has nothing to do with the fact that starting this year most Americans healthcare premiums went up an average of $200.00 per month and they now have less to spend on everything else.

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