Q1 GDP Unexpectedly Drops 2.9%

Real gross domestic product fell at a surprisingly large seasonally adjusted annual rate of 2.9% in the first quarter of 2014, according to a Commerce Department report (link opens as PDF) released today. 

This is the Commerce Department's third and final revision to first-quarter GDP numbers, and its adjustment was far from welcomed by analysts. Although they had expected a downward revision from the second estimate of -1%, their -1.8% prediction proved overly optimistic. 

After growing 2.6% in the fourth quarter of 2013, absolute GDP is back down to just below the adjusted third-quarter 2013 level.

US Real GDP Growth Chart

According to the report, the main reasons for the downward revision included reduced personal spending and fewer exports. Neither is especially good news for the American economy. Personal spending is seen as a "bottom up" economic boost that signals suppliers to increase production, while exports are a major indicator of a nation's international economic balance.

The Commerce Department's report also includes an updated gross domestic purchase price index, which provide some relief from GDP growth numbers. The index's third revision remained exactly the same as the second, posting a 1.3% gain -- also exactly in line with analyst expectations .

For investors, today's report may be old news already. Excellent manufacturing, new-home sales, and consumer confidence reports released this week all point to better times for the current quarter. But with the first quarter's lackluster revision, the economy unfortunately has a longer road to recovery.

Discover a top stock pick for 2014
Every year, The Motley Fool's chief investment officer hand-picks 1 stock with outstanding potential. Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3007747, ~/Articles/ArticleHandler.aspx, 9/1/2015 6:09:41 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Justin Loiseau

Energy and Macroeconomic Specialist keeping investors up to date with macro news, utilities, and good companies doing good things.

Today's Market

updated 8 hours ago Sponsored by:
DOW 16,528.03 -114.98 -0.69%
S&P 500 1,972.18 -16.69 -0.84%
NASD 4,776.51 -51.82 -1.07%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes