Washington: The American economy contracted at an annual rate of 2.9 per cent in the first quarter of this year, the sharpest drop experienced by the US in the last five years.

This drop follows an increase of 3.4 per cent at an annual rate in the second half of 2013.

The entire decline in overall GDP in the first quarter can be accounted for by a decline in exports and a slowdown in inventory investment, two particularly volatile components of GDP.

Jason Furman, Chairman of the Council of Economic Advisers, said the first-quarter GDP was revised down, largely reflecting a re-estimation of consumer spending on health care, which was substantially lower than originally reported, as well as exports, which were below the initial estimates.

“The GDP data can be volatile from quarter to quarter; a range of other data show a more positive picture for the first quarter, and more up-to-date indicators from April and May suggest that the economy is on track for a rebound in the second quarter,” he said.

“The recovery from the Great Recession, however, remains incomplete, and the President will continue to do everything he can to support the recovery, either by acting through executive action or by working with Congress on steps that would boost growth and speed job creation,” Furman said.

According to the report released by Bureau of Economic Analysis, the downward revision to first-quarter GDP growth was concentrated in two areas: consumer spending on health care services and net exports.

The performance of the economy in the first quarter as measured by GDP was significantly below other independently calculated measures.

For instance, aggregate hours worked by private-sector production and non-supervisory workers as measured by the Bureau of Labor Statistics grew 1.4 per cent at an annual rate in the first quarter, while industrial output in the manufacturing sector as measured by the Federal Reserve increased 2.1 per cent at an annual rate, Furman said.

‘The Wall Street Journal’ said in the US economy contracted at a worse pace than previously estimated in the first quarter, marking its sharpest pullback since the recession ended five years ago.

Five years into the recovery, high unemployment and stagnant incomes continue to restrain consumer spending, which accounts for more than two thirds of US economic output.

Consumer spending grew by a one per cent pace in the first quarter, revised down from the previous estimate of 3.1 per cent, it said.

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