Health Care Revision, Weather Drops 1Q GDP
Economists expect the economy to bounce back in the second half of the year after first-quarter Gross Domestic Product (GDP) was revised to a decline of 2.9%, the worst drop since the Great Recession, based largely on a steep downward revision in health-care spending.
Now, 2014 is setting up to be a year of moderate growth, rather than the rosy rebound many economists expected. Second-quarter growth, expected at about 3%, means that the first half of 2014 could show no growth at all. Expectations are for higher growth rates of 3% or more for the third and fourth quarter. That would still mean growth for the year could be just about 2% or less.
The big drop in revised GDP was largely due to a sharp reversal in consumer spending and a smaller-than-expected contribution from exports. The contribution from consumption went from 2.1% to 0.7%, and within that number health care was a large drag. The initial estimate in first quarter GDP was a positive 1% for health-care services but that fell to a decline of 0.2%.
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