The US economy’s output of goods and services decreased at an annual rate of 1 per cent in the first quarter, down from an initial estimated increase of 0.1 per cent, the Commerce Department has said.
The number marks the first negative growth reported in three years – since the first quarter of 2011.
A decline in inventory investment — especially by auto dealerships — was the primary source of the decline seen in the revised second estimate. Also having an impact were slowdowns in business investment, exports, and state and local government spending.
Without the inventory investment component, which also included reduced spending in retail trade, mining, utilities and construction, the gross domestic product (GDP) actually grew by 0.6 per cent between January and March, the report showed.
Corporate profits declined 9.8 per cent in the first quarter, down from an in increase of 2.2 per cent in the fourth quarter. According to the Commerce Department, this was the largest decline since the fourth quarter of 2008.
Jason Furman, chairman of President Barack Obama’s Council of Economic Advisers, observed that the downward revision was due almost entirely to “the highly volatile inventories category,” but said that the first quarter “was subject to a number of notable influences, including historically severe winter weather.”
“Consumer spending on food services and accommodations fell for the first time in four years, one of several components that was likely affected by unusually severe winter weather,” he said.
Furman noted that the first quarter was “the third most unusually cold quarter over the last sixty years’’, following the first quarter of 1978 and fourth quarter of 1976. In addition, there were four major snowstorms in the Northeast US in the first quarter, which Furman said one independent group estimated reduced US GDP by 1.4 per cent.
He noted that several key indicators rebounded in March once the severe weather abated.
According to this second estimate, fourth-quarter 2013 GDP grew at an annualised 2.6 per cent.