US economy contracts for the first time in three years

 
Harriet Green
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As expected, US growth took a hit from the weather in the first quarter, with latest estimates showing a one per cent contraction at an annualised pace.

Economists were expecting a smaller decline of 0.5 per cent. This is the first contraction the economy's seen since 2011, and the second since the economy emerged from recession six years ago.

The Commerce Department's first estimate showed rather pitiful growth of just 0.1 per cent, following a 2.6 per cent rise in GDP in the previous period.

But, assures Capital Economics, the estimate is "nothing to worry about".

It hit durable goods consumption, residential investment, business investment in non-residential structures and exports. But the incoming monthly data already point to a marked turnaround in the second quarter.

Investors are expected to predominantly shrug off the number, with markets anticipating that the severe weather seen over the winter period will have knocked growth.

Weekly jobless claims came in better than expectations, dropping to 300,000 last week. With employment up by almost 300,000 last month too, says Capital Economics, the "numbers point to a recovery gathering some real momentum at last."

The research group still expects second-quarter growth of around 3.5 per cent.