US economy contracts

The US economy contracted in the first quarter as it buckled under the weight of unusually heavy snowfalls, a resurgent dollar and disruptions at West Coast ports, but activity already has rebounded modestly.

The government on Friday slashed its gross domestic product estimate to show GDP shrinking at a 0.7 per cent annual rate instead of the 0.2 per cent growth pace it estimated last month. A larger trade deficit and a smaller accumulation of inventories by businesses than previously thought accounted for much of the downward revision.

There was also a modest downward revision to consumer spending. With growth estimates for the second quarter currently around 2 per cent, the economy appears poised for its worst first-half performance since 2011. The economy’s recovery from the 2007-2009 financial crisis has been erratic.

Weak data on consumer sentiment and factory activity in the Midwest on Friday suggested that while the economy has pulled out of its first-quarter soft patch, the growth pace was modest early in the second quarter. That mirrored other recent soft data on retail sales and industrial production.