Dip in US economy seen as blip
Print Edition
THE United States economy in the first quarter fell 2.9 percent as a harsh winter contributed to the biggest contraction since the depths of the recession five years ago. But the setback is widely thought to be temporary, with growth rebounding solidly since spring.
The contraction, reported yesterday by the Commerce Department, was even more severe than the 1 percent annual decline it had estimated a month ago. Besides the harsh winter, much of the downward revision reflected a drop in health care spending. Another factor was a bigger trade deficit than initially estimated.
Though such a sharp decline would normally stoke fears of recession, analysts see it as a short-lived result of a bad winter that hit factories, disrupted shipping and kept people out of shopping malls and car dealerships. In the April-June quarter, many expect growth to be at least 3.5 percent.
Most analysts foresee the economy expanding about 3 percent in the second half of this year. Reports on consumer spending, manufacturing and business investment have shown a solid rebound this spring.
“We have ample evidence that the first quarter was just a temporary setback, and we are climbing out of the hole,” said Stuart Hoffman, chief economist at PNC Financial.
Analysts say solid hiring, growth in manufacturing and surging auto sales are contributing to a stronger economy.
“The contraction in GDP in the first quarter is not a sign that the US is suffering from a fundamental slowdown,” said Paul Dales, senior US economist at Capital Economics.
If economists are correct that annual growth will be about 3 percent in the second half, it would be a sharp improvement from the 2 percent annual pace of the first five years of this subpar economic recovery.
“We should have a much better second half this year and a much better 2015 than 2014,” said Mark Zandi, chief economist at Moody’s Analytics.
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