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Updated: Preliminary US GDP Falls 1.0% In First Quarter

By Kitco News
Thursday April 17, 2014 10:00 AM

Editor's Note: The article was updated to include more information from the report and comments from CIBC and TD Securities.

(Kitco News) - Adverse weather conditions at the start of the year caused the U.S. economy to contract into negative territory, according to updated data from the Department of Commerce.

Thursday, the department released the second print of first quarter GDP, which showed that the economy declined 1.0%, versus the previous increase of 0.1%.

"The downturn in the percent change in real GDP primarily reflected a downturn in exports, a larger decrease in private inventory investment, and downturns in nonresidential fixed investment and in state and local government spending that were partly offset by an upturn in federal government spending," the report said.

This is the first time U.S. economic growth dipped into negative territory since the first quarter of 2011.

Economists were fairly pessimistic heading into the report with forecasts ranging between a decline of 0.5% and 0.6%. Analysts have noted that U.S. economic growth has been hampered by abnormally harsh weather conditions in January and February.

Although the decline in U.S. first-quarter GDP was almost double what economists were expecting, Avery Shenfeld, senior economist from CIBC World Markets, said that investors shouldn’t “fret too much.”

“Nearly all of the damage came from a lower estimate for inventories, and leaner stockpiles should help lift Q2 and Q3 pace,” he said.

Millan Mulraine, deputy head of U.S. research and strategy at TD Securities, said that the weaker-than-expected report underscored the problems the economy faced at the start of the year due to unseasonably cold weather. However, he is now looking past the first-quarter report.

“With economic momentum beginning to pick up, we are looking for a blockbuster Q2 growth performance, with GDP growth in excess of 4.0%,” he said. “Much of this momentum is expected to be sustained in the second half of the year, with the recovery expected to average an above-trend 3.0% pace.”

Looking at some of the components of the report, the price index for gross domestic purchases during the first three months of the year of 2014 increased 1.3%, down 0.1% from the advanced estimate. Excluding volatile food and energy prices, the price index increased 1.3% in the first quarter, versus a 1.8% increase in the fourth quarter of 2013.

Real personal consumption expenditures increased 3.1% in the first quarter, versus a 3.3% increase in the fourth quarter.

By Neils Christensen of Kitco News; nchristensen@kitco.com



Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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