US economy shrank in first quarter
The US economy shrank 0.7% in the first three months of 2015,
compared to the same period last year.The Bureau of Economic Analysis
significantly revised down its earlier economic growth estimate of 0.2%.
The previous calculation underestimated the rise in the volume of
imported goods and overestimated capital investment by companies, it
said. The US economy last contracted in the first quarter of 2014, when
it shrank by 2.1%. As was the case last year, a harsh winter may have
been partly to blame for falling goods and services production in the
US.Consumer spending, which accounts for about 70% of economic activity,
slowed to 1.8% growth in the first quarter, slightly below the 1.9%
growth initially estimated.The Bureau also highlighted the impact of
weak exports and government spending.
‘Second quarter pick-up’
The strong US dollar has pushed up imports and lowered exports. At
current dollar prices, GDP slipped further from 0.1% growth to a 0.9%
contraction.The revision in GDP prompted investors to shift to
traditionally safer assets, such as bonds. This is why yields on US
Treasuries have fallen as their price has risen.GDP figures are closely
watched by investors, as the Federal Reserve makes decisions based on
the health of the economy.”From a policy perspective, the first quarter
lull is already history;it's the extent of the rebound that will be
critical in determining the timing of the Fed's first move on interest
rates,” says Chris Williamson, chief economist at Markit.”Survey
evidence is already pointing to a second quarter pick-up,” he added.
- BBC News
|