U.S. economy shrinks by most since Great Recession

(FOX News) -- The U.S. economy shrank at 2.9 percent annual rate in in the first quarter, a far more alarming downward pace than announced in two previous government estimates, according to the Commerce Department.

The figure is nearly three times lower than the  preliminary estimate of 1 percent released last month, and marks the worst performance for a three-month period since 2009. A still earlier initial estimate, in April, predicted growth of .1 percent for the quarter. The sluggish economy's woes have been widely attributed to an unusually cold winter, but the latest figure - the biggest difference between second and third estimates since 1976 - could show the problems are bigger than that.

The Commerce Department said its final revision reflected a weaker-than-expected pace of healthcare spending, which caused a downgrading of the consumer spending estimate. Trade was also a bigger drag on the economy than previously thought, Reuters reported.

The economy grew at a 2.6 percent pace in the final three months of 2013, and some economists are optimistic that the poor performance in January, February and March was a mere blip. Data such as employment, manufacturing and services sectors point to a sharp acceleration in growth early in the second quarter. Macroeconomic Advisers recently forecast the economy will grow at a 3.6% annual rate in the April to June period, according to The Wall Street Journal.

However, the jarring final first quarter number could give many pause.

Economists have previously estimated severe weather slashed as much as 1.5 percentage points from GDP growth in the first quarter, but even taking that into account would still leave a precipitous drop in performance.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1.0 percent rate. It was previously reported to have advanced at a 3.1 percent pace. Exports declined at a 8.9 percent rate, instead of 6.0 percent pace, resulting in a trade deficit that sliced off 1.53 percentage points from GDP growth. Weak export growth has been tied to frigid temperatures during the winter.

Businesses accumulated $45.9 billion worth of inventories, a bit less than the $49.0 billion estimated last month. Inventories subtracted 1.70 percentage points from first-quarter growth, but should be a boost to second-quarter growth.

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