WASHINGTON, June 25 (UPI) -- Revised figures from the Commerce Department show that the U.S. economy shrank by 2.9 percent in the first quarter, the largest contraction since 2009.
The nation's gross domestic product fell more than expected in the first quarter, with an earlier estimate pegging economic decline at one percent. This marks the agency's biggest downward revision of growth numbers since its records began in 1976. Economists polled by Bloomberg had estimated a 1.8 percent contraction in the GDP.
The last time the economy shrank was in 2011, nearly two years after the 2007-2009 recession, when it slipped 1.3 percent.
The drop is being attributed to lower outlays in consumer spending. The government revised the increase in consumer spending for the first quarter to one percent from 3.1 percent. Consumer spending is seen as a key indicator of U.S. economic activity.
Reduced spending reflected lower healthcare costs. With the introduction of the Affordable Care Act, the Bureau of Economic Analysis expected healthcare spending to go up, but it actually fell by $6.4 billion instead of rising $39.9 billion as previously estimated.
Economists believe that the weakness in the first quarter is symbolic of temporary factors, such as unusually harsh winter weather, affecting the economy. They believe that this trend will change in the following quarters on account of encouraging numbers seen in job growth, consumer confidence and the improving housing market.
"For the second quarter, we'll see some weather rebound and a return to more normal activity after that long winter," said Sam Coffin, an economist at UBS Securities in New York.