US economy contracts severely in first quarter

The US economy contracted in the first quarter by the most since the depths of the last recession as consumer spending cooled.

Gross domestic product fell at a 2.9% annualised rate, more than forecast and the worst reading since the same three months in 2009, after a previously reported 1% drop, the Commerce Department said. It marked the biggest downward revision from the agency’s second GDP estimate since records began in 1976. The revision reflected a slowdown in healthcare spending.

Consumers returned to stores and car dealerships, companies placed more orders for equipment and manufacturing picked up as temperatures warmed, indicating the early-year setback was temporary. Combined with more job gains, such data underscore the view of Federal Reserve policy makers that the economy is improving and in less need of monetary stimulus.