U.S. economic output shrank slightly in the first quarter of the year, but less quickly than previously estimated.
The Bureau of Economic Analysis reported Wednesday that inflation-adjusted gross domestic product contracted at a 0.2 percent seasonally-adjusted annual rate, down from 2.2 percent growth in the fourth quarter of 2014.
Wednesday’s report is the third and final estimate for gross domestic product. The initial estimate showed output growing at a meager 0.2 percent annual rate, and then that was revised to negative 0.7 percent before Wednesday’s upward revision.
The improvement in the last revision was attributable to consumers spending more than previously thought and exports were smaller.
Wednesday’s revisions were right in line with analysts’ expectations, but the measured growth for the first quarter remains disappointing.
The strong dollar played a major role in the steep drop-off in growth from the fourth quarter of last year to the first quarter of 2015. Net exports subtracted nearly 2 percentage points from growth. A stronger dollar makes U.S. goods more expensive to overseas buyers, while at the same time lowering costs of imported goods for domestic buyers. Imports count against gross domestic product.
A significant decline in non-housing construction and state and local government spending also contributed to the decline.
Gross domestic income, however, a measure of economic output based on incomes earned and costs incurred in production, was up 1.9 percent in the quarter. That is some cause for optimisim, as gross domestic product and income usually track each other over time.
Government officials have disagreed over to what extent the weak first quarter represents one-time factors that shouldn’t dampen growth going forward versus serious underlying problems with the U.S. economy. In particular, economists have pointed to harsh winter weather as one possible culprit. The Bureau of Economic Analysis has also indicated that there may be problems with its seasonal adjustments that make the first quarter appear worse than it really is.
Nevertheless, output growth is weaker than anticipated and well behind where the Obama administration and Federal Reserve expected it before the winter.
Private-sector economists have projected that growth will pick up over the course of the year.
The initial estimate for gross domestic product growth in the second quarter will be released July 30.
