Initially the government said the economy barely grew in the first three months of 2014, rising at a 0.1% annual rate. Yet fresh reports on the U.S. trade deficit, construction spending and business inventories have been softer than Wall Street expected.
The result: economists now predict gross domestic product will be revised down to a decline of 0.2% to 0.4% in the first quarter. A handful of Wall Street firms trimmed their growth forecasts after Tuesday’s trade report.
The last negative quarter was in early 2011, when growth fell by 1.3%.
The latest downer was the U.S. trade deficit in March. While the gap fell by 3.6% to $40.4 billion, government economists expected an even bigger decline when they compiled the preliminary first-quarter report. So trade will become an even bigger drag on GDP when the government updates its numbers at the end of the month.
The silver lining is that most economists predict a big bounceback in the second quarter. They say an unusually harsh winter battered the economy in the first quarter and that improved wearther should lead to a spring rebound – what economists call “catchup.”
Economists forecast a 3.5% advance in second-quarter growth and some, such as Capital Economics, predict a gain of 4%. The economy has only reached the 4% mark in two of the 19 quarters since the recession ended.