The U.S. economy shrank at an annualised rate of 2.9% in the first quarter of 2014, according to the U.S. Department of Commerce. These figures represent the largest drop in U.S. GDP since 2009. Worryingly economists had originally forecasted the economy would grow by 2.6%. These figures represent the largest downward revision of GDP data in 40 years. Poor weather conditions in the U.S. were blamed for the sudden contraction.
After getting these figures so wrong many are now questioning the validity of these numbers. Historically shares would plummet on such data. Wall Street took the news in their stride and the S&P actually increased in value following the news.
As a result of yesterday’s revision the Federal Reserve reduced its overall 2014 GDP figures from 2.8% to 2.1%. The economists who got these figures so wrong are now predicting the U.S. economy will bounce back in the remainder of 2014.