Latest Data Signals Economy Contracted In the First Quarter

Multiple economic analysts on Tuesday revised their estimates for economic growth in the first quarter of 2014 to show that the U.S. economy actually contracted.

Traders work on the floor of the New York Stock Exchange just before the opening bell May 13, 2014 in New York. AFP PHOTO/Stan HONDA STAN HONDA/AFP/Getty Images
Traders work on the floor of the New York Stock Exchange just before the opening bell May 13, 2014 in New York (Getty Images)&nbsp

Real gross domestic product, the total output of goods and services in the U.S., reportedly grew at a seasonally adjusted annual rate of 0.1 percent for the first three months of 2014, according to initial estimates released in April by the U.S. Bureau of Economic Analysis and the Commerce Department.

But that 0.1 figure represents the U.S. government’s initial estimate of real GDP. More information has become available since then.

“Based on more up-to-date figures … private forecasters now expect gross domestic product contracted in the first quarter for the first time in three years,” the Wall Street Journal reported, citing recently released trade data from March.

“The latest evidence came Tuesday, when the Commerce Department released reports on retail sales and business inventories,” the Journal added. “Retail sales in February and March were revised up, but business inventories grew less in March than the agency had assumed in its GDP calculations.”

So, using the new data, several analysts announced Tuesday that they’ve revised their initial estimates for first quarter GDP to reflect that the economy contracted.

J.P. Morgan Chase projects that the U.S. economy contracted by 0.8 percent in the first quarter of 2014. Meanwhile, Macroeconomic Advisers said Tuesday that the economy contracted at a rate of 0.7 percent while Barclays Capital put the figure at around 0.6 percent.

Pierpont Securities said that output declined at a rate of 0.4 percent. 

Lastly, Action Economics projects that the U.S. economy contracted by approximately 0.2 percent.

“Official word will come May 29, when the Commerce Department releases a second estimate for first-quarter GDP. A third estimate will come June 25, just days before the second quarter comes to an end,” the Journal reported.

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