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    Posted June 25, 2014 by
    VarunP84

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    US Economy Contracts by 2.9%

     
    The US economy contracted by 2.9%, compared to the estimated contraction of 1.7%. Major factors which were responsible for slower than expected economic growth were low consumer spending, low exports and below than expected business investments. According to the lawmakers, US has witnessed the worth performance in terms of economic growth in last 5 years. As of now the cold winter has taken the blame for slow economic growth. But there are news of other factors which also contribute to the economic growth of the nation. Economists have started revising the projected economic growth rates. Initially they estimated the US economy to grow by 0.1%, however, in light of various other factors influencing the economic weather in the negative way, it has been revised to a contraction of 3%.

    This is the second time in the US history that there is such a huge difference between the economic estimates. This happened last in 1976. Consumer spending, which accounts for 67% of the US economy, declined about 1% compared to a previous growth of 3.1%. The growth of 1% was the weakest growth experienced in the US economy in last half a decade. Exports which play a very vital role in boosting the economic growth declined more than expected in light of extremely cold temperature. The exports grow at a negative pace of 8.9% compared to a positive growth of 6% same time, last year. The declination of the exports “sliced off” a massive 1.53 percentage points of the US growth rate. This means that, even if the exports stayed neutral, the growth rate of US would have been a negative 1.4%.

    Inventory played a very big role in reducing the nation's economic growth rate. Stockpiles of the companies increased to $45.9 billion compared to previously reported $49 billion. This figure is well below the last quarter of 2013s $111.7 billion. Below than expected inventory numbers pushed the economic growth rate 1.7 percentage points downward. This was just about inventory, the final sales numbers declined 1.3% compared to a rise on 0.6%.

    Owing to decline in the many economic parameters which decide the economic growth, business investment in the nation also took a toll. Business investment in the country retreated to 1.2% compared to decrease in 1.6% reported previously. Most of the companies deducted their spending at the rate of 7.7% while for equipment it was deducted at the rate of 2.8%.

    Despite such disappointing figure on the economic front, lawmakers in the US are pretty confident that the economy will pull back from the bottom. They feel that the climate has played a huge spoilsport for economic growth. The climate is expected to improve in the upcoming months and so will the factors effecting it.

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