The US economy contracted at a 2.9 per cent annual pace in the the first three months of 2014, according to a third and final estimate from the Commerce Department.
That’s more severe than the second estimate of a 1 per cent contraction and the worst quarter for the US since the first three months of 2009, when the economy was reeling from the financial crisis.
Wednesday’s final estimate caps a journey of deterioration for the first quarter which was initially estimated to have grown, albeit it at a measly pace.
The second estimate was hit by a downward revision to the pace at which companies were building up their inventories.
The bulk of the final downward revision is due to spending on healthcare, which officials had overestimated in earlier estimates because of the introduction of President Barack Obama’s new insurance programmes.
A weak first quarter helped fuel the rally in Treasuries and forced the Federal Reserve to cut its growth forecast for this year.
However, the majority of economists and investors are already focused on an expected rebound in the second quarter and what the second half of 2014 holds.
That optimism is underpinned by the improved financial position of US households, less fiscal drag from the government and a labour market that is generating about 200,000 jobs a month.
