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Ear to the Ground

U.S. One Quarter Away From Recession but Economists Are Optimistic

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Posted on May 29, 2014

Photo by TEOJPG (CC BY-SA 2.0)

The U.S. economy contracted for the first time in three years in early 2014, shrinking at an annual rate of 1 percent due in part to an unusually harsh winter in some of the country’s more populous states.

The Guardian reports:

ING’s James Knightley said most of the downward revision to growth had been caused by companies running down their stocks and said the contraction was not as bad as it looked.

Noting that many companies were likely to have run down inventories due to transport problems caused by the bad weather, Knightley added: “With demand indicators looking pretty good for the second quarter of 2014 we are expecting a much stronger outcome for GDP growth in the current quarter (4.5% annualised) with inventory rebuilding likely to play its part.”

Paul Ashworth, chief US economist at Capital Economics, said the run-down in inventories in the first quarter would lead to the bounce-back in the second quarter being even bigger because companies would be rebuilding their stocks of goods.

Read more here.

—Posted by Alexander Reed Kelly.

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