Economic Update: U.S. GDP

The government’s second revision of the nation’s GDP for the first quarter of 2014 was even weaker than had been expected.

The report stated that the economy’s growth rate of declined by 2.9 percent during the January through March period.

The growth rate was also well below Wall Street expectations of –1.8 percent, and well below last quarter’s pace of +2.6 percent.

The current reading for economic growth marks the biggest decline since early 2009 when the Great Recession was nearing its end.

A large part of the larger-than expected decline is attributed to Americans reduced spending on health care.

According to WSJ, the government had originally projected that Obamacare would boost health-care spending in the first three months of the year. However, health-related spending actually fell by $6.4 billion instead of rising by $39.9 billion as had been estimated.

Related Link: Orders For Durable Goods

Recall also that the brutal winter weather has been blamed on the weak GDP output in the first quarter. It is also worth noting that most economic reports have perked up considerably in the last two months. The current consensus is that the current quarter could see GDP expand by more than four percent. 

For reference purposes:

• Q4: +2.6 percent
• Q3: +4.1 percent
• Q2: +2.5 percent
• Q1 2013: +1.8 percent
• Q4: +0.1 percent
• Q3: +3.1 percent
• Q2: +1.3 percent
• Q1 2012: +2.0 percent
• Q4 : +3.0 percent
• Q3: +1.8 percent
• Q2: +1.3 percent
• Q1 2011: +0.4 percent
• Q4: +3.1 percent
• Q3 +2.6 percent
• Q2: +1.7 percent
• Q1 2010: +3.7 percent.

Note that the country’s GDP had increased for 18 consecutive quarters.

On the inflation front, the Deflator came in at +1.3 percent, which was in line with the estimates for a reading of +1.3 percent but below with Q4’s final reading of +1.6 percent (Q3 2013: +2.0 percent).

Finally, Personal Consumption was also weaker than expected, sporting a gain of just +1.0 percent on an annual basis, which was below the last read of +3.3 percent.