Economy shrank more than predicted

McClatchy Newspapers

WASHINGTON

The economy had its worst performance since the Great Recession in the first three months of the year, contracting at an annual rate of 2.9 percent as severe weather took a heavier toll than initially thought, the Commerce Department said Wednesday.

The contraction in total economic output in the first quarter was a huge downgrade from an earlier estimate that so-called gross domestic product shrank at a 1 percent annual rate in the January-through-March period.

Tuesday’s figure, the third and final revision of first-quarter data, was much worse than the 1.8 percent annualized contraction economists had forecast.

Growth has shown signs of rebounding strongly as the weather improved and pent-up demand was released. Economists are forecasting the economy will expand at about a 3.5 percent annual rate in the second quarter.

But the horrible start to 2014 will drag down the year’s overall economic output.

Last week, the International Monetary Fund reduced its estimate for U.S. growth this year to a modest 2 percent from an April projection of 2.8 percent.

The first-quarter contraction was the worst since the economy shrank at a 5.4 percent annual rate in the first quarter of 2009, near the depths of the Great Recession.