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2nd LD Writethru: U.S. economy shrinks in Q1 on severe weather

Xinhua, May 29, 2015 Adjust font size:

The U.S. economy shrank 0.7 percent at an annual rate in the first quarter of 2015, marking the third quarterly contraction after the financial crisis ended in mid-2009, according to the second estimate from the U.S. Commerce Department released Friday.

The Commerce Department estimated last month that the economy expanded 0.2 percent in the first quarter. The bitterly cold winter weather is blamed for pummeling personal consumption and private inventory investment, dragging down growth to the negative territory.

Exports were hard hit by tepid foreign demand and a stronger dollar. Consumers are saving the windfall from lower oil prices, weakening the key engine of the world's largest economy.

Personal consumption increased 1.8 percent in the first quarter, compared with an increase of 4.4 percent in the fourth quarter of 2014. Nonresidential fixed investment decreased 2.8 percent, in contrast to an increase of 4.7 percent in the previous quarter. Exports dived 7.6 percent, compared with an increase of 4.5 percent in the fourth quarter.

Analysts said the weak Q1 data suggested the economy is not recovering on a solid footing. The Federal Reserve has been cautious in kicking off the interest rate lift-off as it fears an abrupt tightening could jeopardize the hard-earned recovery.

Two consecutive quarterly contraction is seen as a symbol of recession. Most of the analysts expected the U.S. economy will rebound in the second quarter.

The U.S. economy shrank 0.7 percent in the second quarter of 2009 and contracted 2.1 percent in the first quarter of 2014, respectively.

The Commerce Department will release the final estimate of the Q1 GDP on June 24. Endite