Since the recession ended in 2009, the U.S. economy has experienced mainly positive growth. But new data from the Commerce Department on Wednesday reveals that in the first quarter of 2014, the economy contracted — suffering its sharpest pullback in 5 years.
The nation’s gross domestic product — the total output of goods and services produced — shrunk at a seasonally-adjusted rate of 2.9%. That’s a change from both the 1% decrease that the Commerce Department reported last month, and its first estimate in April of a 0.1% uptick.
Consumer spending — which accounts for over two-thirds of the U.S. GDP — was also weaker than previously projected. Original numbers showed a rate increase of 3.1%, but new reports show only a 1% advance.
The low first-quarter numbers are generally thought to be only temporary, and reflect the effects of the harsh winter weather that closed businesses and discouraged Americans from shopping. The trend of sluggish consumer spending is also attributed to the continued high unemployment rate and stagnant wages.
A drop in health care spending and a trade deficit that proved larger than originally estimated further contributed to the revised, reduced data.
For Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi, the sag in growth only proves that the U.S. economy has a long way to go in its recovery.
“It does not sound like the economy has reached escape velocity no matter how you try to spin it,” Rupkey said. “It’s going to take some big numbers the rest of 2014 for the economy to hit 2% growth.”
Despite the disappointing economic reports, the U.S. stock market fared well on Wednesday — edging higher in afternoon trading.