The U.S. economy shrank at a 0.7% annual rate in the first three months of the year, depressed by a severe winter and a widening trade deficit.
The Associated Press reports the government’s revised estimate for last quarter was weaker than its initial estimate of a 0.2% growth rate. The U.S. trade gap—the difference between the value of exports and the larger value of imports—was found to be wider than first estimated. And consumer spending was slower than previously thought.
Though the economy shrank in the January-to-March quarter for a second straight year, steady job gains are expected to propel modestly healthy growth for the rest of 2015. The harsh winter, which kept many consumers home and businesses closed, and a labor dispute that slowed trade at West Coast ports are both over. Home sales and construction are rebounding, along with business investment.
Analysts generally foresee the economy, as measured by gross domestic product, growing at an annual rate of 2% to 2.5% in the April-to-June quarter, with further strengthening later in the year. But risks remain: A stronger dollar, which makes U.S. exports more expensive, likely will continue to keep the trade deficit wide. And cutbacks in oil drilling, a result of low energy prices, could depress spending in the energy industry.
“While the evidence of a second-quarter rebound hasn’t been overwhelming, we still think that the outlook for the economy is very encouraging,” Paul Ashworth, chief U.S. economist at Capital Economics, writes in a research note.
