US economy ‘shrank sharply’ after winter

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.