US economic data to be reviewed after Q1 dip revised

The world's largest economy did not contract by as much as was feared in the first three months of 2015, revised data show, as debate continues over what some see as an inherent 'seasonal' weakness in the figures.

Back in March a first estimate of GDP, which tracks the broadest measure of economic growth and productivity, suggested the US economy had contracted by 0.7 per cent for the three months to March, The Guardian reports.

Those figures had raised fears for Britain's only fragile recovery. Caught between turmoil in the eurozone and apparent weakness in the US, the UK's sluggish growth had looked vulnerable.

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But a revised estimate from the Commercial Department yesterday put the number at a more palatable 0.2 per cent contraction, which the Wall Street Journal says brings it into line with the median projection of economists. The improvement is a result of better than forecast growth in consumer spending and spending on household improvements.

The change underlines an ongoing debate over a perceived seasonal bias in the data, which Bloomberg says could mean the first quarter artificially underperforms the rest of the year by up to 1.7 percentage points.

The opening of a year will often see lower levels of spending, coming as it does during the coldest winter months and in the wake of spending excesses leading up to Christmas. A survey of economist suggests that second quarter GDP growth will come in at 2.5 per cent and that the economy will expand by an average of 3 per cent in the second half of the year.

Writing in Forbes, Tim Worstall says the past two years have seen falls in US GDP in the first quarter even though most do not believe the economy has deteriorated, adding "we've probably not got our adjustments right".

The Bureau of Economic Analysis is publishing the final GDP figure for Q1 on 30 July, at which point it has said it will address the question of the so-called "residual seasonality" in the data. For its part the US central bank's board published a report in May which found no evidence of a problem with the data, blaming persistent first quarter declines on "a couple of outlier years" and "soft readings" caused by poor weather.