US Economy shrinks by 3% in Q1

As the US Commerce Department stated on June 25, 2014 the US GDP fell by three percent during the first quarter of 2014.

The US Commerce Department lowered the estimate for the US economic growth again to negative 2.9% (annualized) after reducing it to positive one percent in April already. This is the largest fall in GDP within the past five years.

Reasons for this drop are, according to the Commerce Department, the unusually bad weather, lower than expected consumer spending and lower trade. Especially spending on health care was overestimated at first due to the launch of Obama’s health care program.

Still, a recession must not be feared. The growth for the first quarter is said to be an outlier resulting form one-time effects. By now, the economy is growing and despite the bad figures, unemployment was reduced every single month.
It is expected that overall economic growth will be around 2% and thereby still falling short of the 3% target rate.

Because market participants expected similar information, there was hardly any effect on the stock markets.