The U.S. economy turned in its worst quarter in five years during the first three months of 2014, shrinking more sharply than previously estimated.
The nation's gross domestic product in the first quarter fell at a 2.9% annual rate, vs. the 1% contraction previously believed, the Commerce Department said Wednesday. Economists surveyed by Bloomberg expected a 1.8% drop in output from the fourth quarter.
The decline was the sharpest since growth tumbled 5.4% in the first quarter of 2009, during the Great Recession. It was also one of the worst falloffs outside of a recession since 1960.
The last time the economy shrank was in the first quarter of 2011, almost two years after the 2007-2009 recession ended, when it slipped 1.3%.
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The more dramatic drop last quarter was largely the result of smaller growth in household consumption than previously estimated. Consumer spending increased just 1%, vs. the 3.1% gain previously estimated as health care spending dipped slightly. The government previously said that medical expenditures contributed about a percentage point to growth, as the Affordable Care Act began to cover more Americans. On Wednesday, it said health care spending subtracted 0.16% from growth.
Also, exports declined 8.9%, vs. the 6% drop previously estimated. Businesses replenished their stocks even more slowly than believed after aggressively adding to inventories late last year.
The larger-than-expected drop in output is not a harbinger of an economy headed back to recession or even softening. Many economists say much of the first-quarter weakness was the result of temporary factors, such as unusually harsh winter weather. They expect growth to exceed 3% in the current quarter and the rest of the year.
In a research note before Wednesday's report, Goldman Sachs said, "2014 will mark the start of a period of clearly above-trend growth for the US economy."
Paul Dales of Capital Economics said the contraction "was still largely due to the extreme weather" and "not a sign that the U.S. is suffering from a fundamental slowdown."
Reports this week show that the housing market picked up last month after the dismal first-quarter, with new homes selling at the fastest pace since 2008, and existing-home sales posting their largest increase in three years.
Job growth, consumer confidence and measures of manufacturing and service sector activity also have gained steam recently.