Durable Goods Orders
Scott Olson/Getty Images
By Lucia Mutikani

WASHINGTON -- The U.S. economy contracted at a much steeper pace than previously estimated in the first quarter to record its worst performance in five years, but there are indications that growth has since rebounded strongly.

The Commerce Department said Wednesday gross domestic product fell at a 2.9 percent annual rate, instead of the 1 percent pace it had reported last month.

While the economy's woes have been largely blamed on an unusually cold winter, the magnitude of the revision suggests other factors at play beyond the weather.

Growth has now been lowered by a total of 3 percentage points since the government's first estimate was published in April, which had the economy expanding at a 0.1 percent rate.

The difference between the second and third estimates was the largest on records going back to 1976. Revisions to GDP numbers aren't unusual as the government does not have complete data when it makes its initial and preliminary estimates.

Economists had expected growth to be revised to show it contracting at a 1.7 percent rate.

U.S. stock index futures fell on the data, while prices for U.S. government debt rose. The dollar fell against a basket of currencies.

The latest revisions reflect a weaker pace of health care spending than previously assumed, which caused a downgrading of the consumer spending estimate. Trade was also a bigger drag on the economy than previously thought.

Economy Growing

The economy grew at a 2.6 percent pace in the final three months of 2013. Data on employment, manufacturing and services sectors point to a sharp acceleration in growth early in the second quarter.

However, the pace of expansion could fall short of expectations, which range as high as a 3.6 percent rate.

In a second report, the department said orders for long-lasting U.S. manufactured goods fell 1 percent last month.

Orders for these items, which range from toasters to aircraft that are meant to last three years or more, fell for the first time in three months.

They were dragged down by weak demand for transportation, machinery, computers and electronic products; electrical equipment, appliances and components; as well as a 31.4 percent plunge in defense capital goods orders.

Economists estimate severe weather could have slashed as much as 1.5 percentage points from GDP growth in the first quarter. The government, however, gave no details on the impact of the weather.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1 percent rate. It was previously reported to have advanced at a 3.1 percent pace.

Exports declined at a 8.9 percent rate, instead of a 6 percent pace, resulting in a trade deficit that sliced off 1.53 percentage points from GDP growth. Weak export growth has been tied to frigid temperatures during the winter.

Other drags to first-quarter growth included a slow pace of restocking by businesses, a sharp drop in investment on non-residential structures such as gas drilling and weak government spending on defense.

Businesses accumulated $45.9 billion worth of inventories, a bit less than the $49 billion estimated last month. Inventories subtracted 1.7 percentage points from first-quarter growth, but should be a boost to second-quarter growth.

A measure of domestic demand that strips out exports and inventories expanded at a 0.3 percent rate, rather than a 1.6 percent rate.

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The Obama adminstration has been painting a pretty picture in the past to obtain votes from low information voters. That type of un-truth bubble can only last so long. Obama will disagree with me. I suggest folks who think the Obama deception wil last a long time (forever) need have another thought coming.

Protect you investments. I don't care how you do it. Good luck.

June 26 2014 at 4:08 AM Report abuse +1 rate up rate down Reply

Will 11 million illegal immigrants and 50-100 thousand illegal children help boost the economy of the USA ?
Will they be willing to accept lower wages paid under the table while the graduates of high school look for their first beginner job?
The social services they will require will be paid for by more taxes on the diasappearing middle clss.

June 26 2014 at 3:56 AM Report abuse +1 rate up rate down Reply
Brian Workman

I told you so, month's ago, and now the BIG CRASH, is just around the corner!!

June 26 2014 at 2:59 AM Report abuse rate up rate down Reply

Well, well, well, guess we are right on tract.....to hell.

June 26 2014 at 2:46 AM Report abuse rate up rate down Reply

007 - Take a pill. Open your mind and learn a few updated facts. There are none so blind that have perfect vision.

June 26 2014 at 2:21 AM Report abuse rate up rate down Reply

it's going to be a long winter.

June 26 2014 at 12:50 AM Report abuse +1 rate up rate down Reply

It's Summertime. How long are these lame "economic experts" going to try to sell that phony "bad weather effect" as a reason for the economy continuing to circle the drain??

That big lie is neck and neck with their other big lie --- that the "recession" (which they refuse to admit is a full-blown Depression) has ended and everything is looking up.

I don't know how anyone else's town is doing, but my hometown is definitely on the ropes. Four more small business stores either have already closed or are currently having their going-out-of-business sales. Total so far is the pet shop has closed, one antique shop has closed (and the other antique shop is having its' store closing sale as is another store that is a gift and card shop). And that is just for the month of June. Every month, for over a year, has brought at least one store closing.

About a third of the storefronts in town are vacant, with For Rent signs in the front window. If this continues, this place will end up as a ghost town.

June 25 2014 at 8:21 PM Report abuse +1 rate up rate down Reply
1 reply to Valerie's comment

If everyone with a car and a concern for the economy just took a ride around their business areas they would witness the many malls and office buildings.....EMPTY. This has been going on since the middle of the Obama dictatorship.

June 26 2014 at 2:50 AM Report abuse +1 rate up rate down Reply

All thanks to Obama and his AWOL Economy. LMFAO

June 25 2014 at 8:16 PM Report abuse rate up rate down Reply

We are still reeling from the Bush with a GOP house and senate economical debacle.

Who raised the corporate tax rate? Who passed the trade deals and gave China favorite nation status? What are American citizens now unfavorites?

June 25 2014 at 7:41 PM Report abuse -2 rate up rate down Reply
1 reply to Iselin007's comment

Puleeeze get off the Bush done it train! Get on the Obama's get off your ass chant.

June 26 2014 at 2:52 AM Report abuse rate up rate down Reply

Some people were lucky when their plants closed they were close to retirement as for everyone else they were put out on their ear to compete for crap jobs against a sea of people. Unfair trade put an end to many who were gaining experience in their trade. Many more started retraining because they knew they had to get into some of the technology jobs only to find those jobs being outsourced.

June 25 2014 at 7:29 PM Report abuse rate up rate down Reply