2014.06.2603:47:50UTC+00US 1st quarter growth revised to worst in 5 years

While investors and economists alike have long expected that the US economy’s performance in the first three months was worse than what previous reports indicated, yesterday’s revised figures still ended up surprising most market players.

In a statement on Wednesday, the Commerce Department revealed that the previous growth evaluation for the first quarter of 2013 was significantly overestimated. As a result, they revised last month’s statistics that said the economy contracted by 1% to instead show a steeper decline of 2.9%, representing its worst showing in half a decade.

Market predictions were expecting an updated number to show that the economy shrunk by 1.7% due to an unusually severe winter season that played a role in the downturn as restocking of inventories became slower together with the expiration of unemployment benefits and decreased investments for non-residential structures. The quarter had been a center of uncertainty as a growth of 0.1% was what was originally reported.

Several sectors in the world’s largest economy contributed to the downward revision by performing more poorly than what was initially thought of. The bulk of activity in consumer spending grew slower by 1% instead of 3.1% and exports slid down to their lowest activity level in five years with an 8.9% reduction instead of a 6% rate.

Market conditions have picked up, however, led by the more than four year high activity level in the services sector and consecutive monthly improvements in the labor market. While it is estimated that the second quarter will enjoy a return to growth of as much as 4%, the steeper than expected decline in the first quarter could prove a difficulty to reach the 3% year end growth rate set by the Federal Express.