Wednesday, July 30, 2014
YOLO COUNTY NEWS
99 CENTS

Economy shrank at 2.9% rate in first quarter

By
From page A2 | June 25, 2014 |

WASHINGTON (AP) — The U.S. economy shrank at a steep annual rate of 2.9 percent in the January-March quarter as a harsh winter contributed to the biggest contraction since the depths of the recession five years ago. But the setback is widely thought to be temporary, with growth rebounding solidly since spring.

The first-quarter contraction reported Wednesday by the Commerce Department was even more severe than the 1 percent annual decline it had estimated a month ago. Besides the harsh winter, much of the downward revision reflected a drop in health care spending. Another factor was a bigger trade deficit than initially estimated.

Though such a sharp decline would typically stoke fears of another recession, analysts see it as a short-lived result of winter storms that shut factories, disrupted shipping and kept Americans away from shopping malls and auto dealerships. They say the economy is rebounding in the April-June quarter. Many expect growth to reach a robust annual rate of at least 3.5 percent this quarter.

Most analysts also foresee the economy expanding at a healthy rate of around 3 percent in the second half of this year.

Reports on consumer spending, manufacturing and business investment have shown a solid rebound this spring. Orders for big-ticket manufactured goods excluding military hardware and for core capital goods, a proxy for business investment, rose strongly in May, a report Wednesday showed.

“We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter,” said Stuart Hoffman, chief economist at PNC Financial.

Last quarter’s 2.9-percent annual decline in economic activity, as measured by the gross domestic product, followed a 2.6-percent gain in the fourth quarter. It was the weakest showing since the economy shrank at a 5.4-percent annual rate in the first quarter of 2009 in the midst of the Great Recession.

Most of the downward revision from the government’s previous estimate of a 1 percent annual decline reflected a change in the estimate of spending on health care. The government had previously estimated a strong gain in this category reflecting implantation of provisions of the Affordable Care Act.

But data derived from an actual survey showed the government’s estimate was far too optimistic. Health care spending, instead of rising at a 1-percent rate, had fallen in the first quarter at a 0.2-percent rate.

Analysts say solid hiring, growth in manufacturing and surging auto sales are contributing to a stronger economy. A stumbling housing recovery has been a concern. But even there, recent data on home sales and construction have been encouraging.

“The larger contraction in GDP in the first quarter is not a sign that the US is suffering from a fundamental slowdown,” said Paul Dales, senior U.S. economist at Capital Economics.

If economists are correct that annual growth will reach around 3 percent in the second half of the year, it would be a sharp improvement from the 2 percent annual pace of the first five years of this subpar economic recovery.

“We should have a much better second half this year and a much better 2015 than 2014,” said Mark Zandi, chief economist at Moody’s Analytics.

Zandi said he’s forecasting growth of 3.5 percent to 4 percent in 2015. If he’s correct, that would be the strongest year since the economy grew 3.8 percent in 2004.

“In past recoveries, we have always gotten a year of very strong growth,” Zandi said. “I think we will get that in 2015,” helped by a long-awaited improvement in wage growth.

Of course, the optimistic projections could prove too rosy. Analysts see risks to their forecasts, primarily the possibility that tensions in the Middle East could cause oil prices to surge given the deteriorating crisis in Iraq.

Surging energy prices have preceded earlier economic slowdowns, including the most recent recession.

————

By Martin Crutsinger, AP economics writer

 

Comments

comments

The Associated Press

.

News

 
Family enterprise builds a home for music

By Elizabeth Case | From Page: A1 | Gallery

 
Mosquito districts sprays tonight

By Enterprise staff | From Page: A2

 
Bob Dunning: Poll dancing, direct from Las Vegas

By Bob Dunning | From Page: A2

Health premiums rose significantly in 2014

By The Associated Press | From Page: A2

 
Biggest book sale to date opens Friday at Davis library

By Enterprise staff | From Page: A4

Share your love of nature with young wetlands visitors

By Special to The Enterprise | From Page: A4 | Gallery

 
Tasting event benefits Yolo Land Trust

By Lily Holmes | From Page: A4

Movies in the Park return this fall

By Enterprise staff | From Page: A4

 
Tee off for Davis’ continued prosperity

By Lily Holmes | From Page: A4

Center for Families hosts Summer Carnival

By Enterprise staff | From Page: A4

 
Vintage car show planned this fall

By Enterprise staff | From Page: A4

Davis native named a Schweitzer Fellow

By Special to The Enterprise | From Page: A4

 
DHS Class of ’94 set 20th reunion

By Enterprise staff | From Page: A5

Tips, techniques will give you a green thumb

By Enterprise staff | From Page: A5

 
Grief support focuses on journaling

By Special to The Enterprise | From Page: A5

How the Bockler wasp got its name

By Kathy Keatley Garvey | From Page: A5 | Gallery

 
Kiwanis golf tournament supports local agencies

By Enterprise staff | From Page: A5

Drop off school supplies at Edward Jones offices

By Enterprise staff | From Page: A5

 
Wine-tastings will benefit YCCC

By Enterprise staff | From Page: A5

UC Davis alumnus hopes to bring amateur radio to Nepal

By Rachel Uda | From Page: A7 | Gallery

 
Yolo County CASA seeks volunteer child advocates

By Enterprise staff | From Page: A7

Recycle old paint cans for free

By Enterprise staff | From Page: A8

 
.

Forum

Not sure which direction to go

By Creators Syndicate | From Page: B5

 
Violence as entertainment

By Letters to the Editor | From Page: A6

Shocked at vampires story

By Letters to the Editor | From Page: A6

 
Paul Krugman: Corporate artful dodgers

By Paul Krugman | From Page: A6

Nicholas Kristof: The world’s coolest places

By Nicholas Kristof | From Page: A6

 
Tom Meyer cartoon

By Debbie Davis | From Page: A6

Gravel mining affects us all

By Letters to the Editor | From Page: A6

 
.

Sports

Fiona Buck pushes the limits in para-athletics

By Felicia Alvarez | From Page: B1 | Gallery

 
A’s rally to win

By The Associated Press | From Page: B1

Morse homers but Giants lose 6th straight

By The Associated Press | From Page: B1

 
Nightmare on Ballpark Drive for River Cats

By Will Bellamy | From Page: B1 | Gallery

Schaub settles in as Raiders starting QB

By The Associated Press | From Page: B2

 
.

Features

.

Arts

Brady earns top honors at State Fair

By Enterprise staff | From Page: A9

 
Smither releases new CD Saturday at The Palms

By Kate Laddish | From Page: A9 | Gallery

RootStock kicks off ‘Día de Albariño’

By Enterprise staff | From Page: A9

 
Folk musicians will jam in the Arboretum

By Enterprise staff | From Page: A9

YoloArts to host a state of change exhibit

By Enterprise staff | From Page: A9

 
UCD professor Andy Jones named Davis’ new poet laureate

By Rachel Uda | From Page: A9 | Gallery

 
Molten art on display at Davis Arts Center

By Enterprise staff | From Page: A9

.

Business

.

Obituaries

Calvin D. Rourke

By Special to The Enterprise | From Page: A4

 
.

Comics

Comics: Wednesday, July 30, 2014

By Creator | From Page: B6