WASHINGTON (MarketWatch) — The economy contracted in the first quarter for the second straight year, a disappointing start that could foil the chance of the U.S. reaching 3% growth in 2015 for the first time in a decade. Gross domestic product — the value of everything a nation produces — shrank by 0.7% annual rate from January to March, the Commerce Department said Friday. Last month the government originally had reported a tepid 0.2% increase in GDP. The big markdown in the economy’s performance stemmed from a smaller inventory buildup and higher imports than preliminary data showed. Consumers, for their part, spent at moderate rate and businesses cut overall investment except in residential housing. Wall Street was prepared for a negative number. Economists surveyed by MarketWatch had expected GDP to be revised to show a 1% decline. Investors are likely to brush off the weak report, focusing more on the current trajectory of the economy. Fresh evidence points to a pickup in U.S. growth, though perhaps not quite as fast as hoped. The MarketWatch survey estimates GDP will increase 3.2% in second quarter, but a new tracking tool created by the Atlanta Federal Reserve puts the gain at just under 1% with a month to go. The economy has been bolstered by an upsurge in hiring over the past year, along with scattered signs of rising wages. Companies have hired nearly 4 million workers since 2014, driving the official unemployment rate down to a seven-year low of 5.4%. These newly employed workers are spending more money, though not lavishly so, to help to keep the wheels of the economy turning. Consumer spending accounts for up to 70% of U.S. economic activity. In the first quarter, consumer spending rose at a 1.8% clip, down a tick from the original reading. Americans spent a bit less on cell-phone service than initially reported. The increase in spending, however, was well below the 2.4% average since the U.S. recovery firmly took root in 2010. Unless consumers spend more, the economy is unlikely to grow much faster in light of new headwinds such as a strong dollar and renewed weakness in business investment. A soaring dollar has curbed U.S. exports by making American goods and services more expensive in other parts of the world. And the U.S. energy industry has cut back on new drilling platforms and other expensive equipment amid a plunge in oil prices. In the opening months of 2015, exports sank 7.6% while the increase in imports was raised to 5.6% from a preliminary 1.8%, revised government data show. A larger trade deficit subtracts from GDP.

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