WASHINGTON – The economy in the U.S. contracted for the first time in three years from January through March as companies added to inventories at a slower pace and curtailed investment.
Gross domestic product fell at a 1 percent annualized rate in the first quarter, a bigger decline than projected, after a previously reported 0.1 percent gain, the Commerce Department said Thursday in Washington. The last time the economy shrank was in the same three months of 2011. The median forecast of economists surveyed by Bloomberg called for a 0.5 percent drop.
A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed. Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll.
“The good news is that the first quarter is over, it was a difficult one for the U.S. economy,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pa. “I wouldn’t worry too much about the decline, it’s mostly driven by less construction spending and less inventory accumulation. This quarter should be a good one.”
Another report on Thursday showed fewer Americans than forecast filed for unemployment benefits last week. Jobless claims dropped by 27,000 to 300,000. The four-week average decreased to the lowest level since August 2007.
Stock-index futures held gains after the figures. The contract on the Standard & Poor’s 500 Index expiring in June rose 0.1 percent to 1,911.5 at 8:52 a.m. in New York.
Projections of the 79 economists surveyed by Bloomberg for GDP, the value of all goods and services produced, ranged from a decline of 0.9 percent to a gain of 0.7 percent. Thursday’s estimate was the second of three readings for the quarter, with the final release scheduled for June 25.