Wednesday, June 25, 2014

Economy in freefall? 1Q revision shows shrinkage of 2.9%

America's economy shrank at a drastic 2.9 percent annual rate in the first quarter, a far more alarming picture than ones painted in two previous government estimates -- including one that actually claimed modest growth.

The new figure released Wednesday by the Commerce Department is nearly three times lower than last month's preliminary estimate of 1 percent shrinkage -- at the time the worst three-month performance since 2009 -- and far greater than the 0.1 percent growth estimate in April. The sluggish economy's woes have been widely attributed to an unusually cold winter, but the latest figure -- the biggest difference between second and third estimates since 1976 -- could indicate far greater problems.

While economists attributed those bad numbers to weather and other factors, the jarring number, dubbed "an absolute disaster" by Wall Street blog ZeroHedge.com -  is more difficult to dismiss.

Fox New contributor and economist Peter Morici said there were several factors that can help explain away the lousy performance. But he said there are reasons for concern.

"Businesses scaled back their investment, and that is a bit foreboding," said Morici. "They just don't believe the president's ballyhoo about this being a breakout year."

The number will be revised once more next month, when the Commerce Department's Bureau of Economic Analysis makes historical revisions. But the negative 2.9 percent  figure is nearly three times lower than the  preliminary estimate of 1 percent released last month, and marks the worst performance for a three-month period since 2009. A still earlier initial estimate, in April, predicted growth of .1 percent for the quarter. The wide gap between estimates was problematic to many economists.

Read more http://www.foxnews.com/us/2014/06/25/economy-in-freefall-1q-revision-shows-shrinkage-2/ 

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