High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/11d33ac0-0601-11e5-868c-00144feabdc0.html#ixzz3bX5iPrOj
In an echo of 2014, the US economy contracted in the first three months of this year, according to a second official estimate released on Friday.
The economy shrank 0.7 per cent on an annualised basis in the first three months of the year, the Commerce Department said.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/11d33ac0-0601-11e5-868c-00144feabdc0.html#ixzz3bX5nCfN8
That is much weaker than the 0.2 per cent growth the first estimate showed. Economists had forecast a downward revision, with the consensus expecting a deeper contraction of 0.9 per cent.
A weaker performance from US exporters, as well as a slower stockpiling of inventories by companies than first estimated, was largely responsible for the downward revision.
US multinationals have complained loudly about the squeeze they faced from the stronger dollar, and the weak showing of exports knocked 1.9 percentage points off GDP in the quarter.
The economy’s soggy performance at the start of the year has not yet shaken the confidence of policy makers at the Federal Reserve that the world’s most important economy will pick up speed.
Janet Yellen, the Fed’s chairwoman, last week forecast that the economic data will strengthen, likely allowing the central bank to raise short-term interest rates for the first time since the financial crisis.
Although the picture emerging from the second quarter has been a mixed one so far, a combination of households’ continued deleveraging since the 2007-2008 financial crisis, rising house prices, cheaper gasoline and steady employment growth are behind the optimism that growth will improve.
High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email ftsales.support@ft.com to buy additional rights. http://www.ft.com/cms/s/0/11d33ac0-0601-11e5-868c-00144feabdc0.html#ixzz3bX5q7JRm
Friday’s revision showed that the pace of household spending dipped to 1.8 per cent from an initial estimate of 1.9 per cent. However, that is down sharply from the 4.4 per cent rate in the final quarter of 2014.
Policy makers from the Fed have said that much of the weakness at the start of the year was probably due to transitory factors such as the weather, indicating that improving data in the spring could prompt the central bank to lift rates for the first time since the financial crisis.
The slide in economic activity in the world’s largest economy has investors shifting back into safe-haven assets.
Yields on Treasuries slipped across the curve, with equal buying of both long- and short-dated securities.
The yield on the two-year note, the most sensitive to the prospect of a rate rise from the Federal Reserve, slid 2 basis points to 0.61 per cent, while that on the five-year fell 2 basis points to 1.50 per cent.
Treasuries have rebounded in the past two weeks, after an unexpected rout at the start of the month sent yields on the benchmark 10-year note to its highest level of the year.
On Friday, the yield on 10-year US government paper, which moves inversely to its price, declined 2 basis points to 2.11 per cent.
