US economy 'shrank sharply' after winter

Extreme weather blamed for biggest contraction since recession, but economy tipped to rebound robustly this quarter.

    US economy 'shrank sharply' after winter
    Despite Wednesday's news, analysts predict the US economy will show a robust rebound this quarter [AFP]

    The US economy shrank at a steep annual rate of 2.9 percent in the January-March quarter as a harsh winter contributed to the biggest contraction since the depths of the recession five years ago.

    The first-quarter contraction, reported on Wednesday by the government, was even more severe than the one percent annual decline it had estimated a month ago.

    Much of the downward revision reflected an unexpectedly sharp drop in health-care spending. Another factor was a bigger trade deficit than earlier estimated.

    However, the setback is widely thought to be temporary, with growth rebounding solidly since spring.

    Though such a sharp economic decline would typically stir fears of another recession, analysts see it as a short-lived result of winter storms that shut factories, disrupted shipping and kept Americans away from shopping malls and car dealerships.

    Many expect growth to reach a robust annual rate of 3.5 percent or better this quarter.

    Some analysts noted that several possible temporary factors slowed the economy last quarter, from businesses reducing their pace of restocking to companies paring their purchases of equipment.

    Also, a wider trade deficit cut 1.5 percentage points from growth. Housing construction slumped.

    Those negative forces are likely to turn positive this quarter, analysts say.

    The economy is getting a lift from an improving job market, which has added more than 200,000 jobs each month over the past four months.

    SOURCE: Agencies


    YOU MIGHT ALSO LIKE

    Meet the deported nurse aiding asylum seekers at US-Mexico border

    Meet the deported nurse helping refugees at the border

    Francisco 'Panchito' Olachea drives a beat-up ambulance around Nogales, taking care of those trying to get to the US.

    The rise of Pakistan's 'burger' generation

    The rise of Pakistan's 'burger' generation

    How a homegrown burger joint pioneered a food revolution and decades later gave a young, politicised class its identity.

    'We will cut your throats': The anatomy of Greece's lynch mobs

    The brutality of Greece's racist lynch mobs

    With anti-migrant violence hitting a fever pitch, victims ask why Greek authorities have carried out so few arrests.