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Montevideo, November 17th 2018 - 17:17 UTC

US economy shrinks 0.7% in first quarter; harsh winter partly to blame

Monday, June 1st 2015 - 06:50 UTC
Full article 2 comments
The previous calculation underestimated the rise in the volume of imported goods and overestimated capital investment by companies The previous calculation underestimated the rise in the volume of imported goods and overestimated capital investment by companies

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.

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

Categories: Economy, United States.

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  • Brasileiro

    If the United States does not rise interest rates, banks will begin to file for bankruptcy. If US interest rates rise, the economy will go into depression and will be drowned by the weight of the dollar itself than will return to home.

    Jun 02nd, 2015 - 11:59 am 0
  • The_troLLimpic_games

    @1

    That is what I warned Yankeeboy about months and months ago.

    If they don't raise interest rates, the new real estate bubble underway will continue to inflate, and eventually cause yet another US crash, and they are also accelerating the death of the Dollar since who wants to have cash in a currency backed by paper and debt. But if they raise rates, they kill the only motor of the US economy, remember, they don't produce anything anymore, the oil boom is over, and consumers have no more money or credit, since their cards are maxed out and salaries in the US have not gone up in 40 years. Raising rates kills the only engine of growth and sends the USA into a recession.

    Jun 03rd, 2015 - 12:15 am 0
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