• United States
• Brazil
• Peru

• China
• Japan
• South Korea

EUROPE / AFRICA / MIDDLE EAST

• Germany
• Romania
• Spain

The latest data shows the U.S. economy contracted significantly more than previously estimated in the first quarter of this year.

The Bureau of Economic Analysis released its third and final estimate of real gross domestic product for the first three months of 2014. The release showed output in the U.S. declining at an annual rate of 2.9%. This is relative to fourth quarter 2013, when real GDP grew 2.6%.

The final number is also down from BEA’s negative 1% second estimate released last month and even more sharply from its first estimate that showed GDP growing 0.1%. While this makes Q1 the economy’s worst since Q1 2009, the heart of the recession, economists were anticipating the further downward revision.

"The bad weather in much of the U.S. in early 2014 was a significant drag on the economy, disrupting production, construction, and shipments, and deterring home and auto sales," wrote PNC Senior Economist Gus Faucher in a note out prior to the release. "But data show growth rebounding in the second quarter, with improvements in home and auto sales and residential construction."

The major stock indices slipped into the red as the opening bell approached but quickly returned to positive territory. This seems to indicate that investors were also writing off the contraction as temporary.

In an interview following the release Stephen Auth, Chief Investment Officer at Federated Investors, called the revision "pretty incredible" but says that underlying trends have shown improvement that has simply been "masked" by the weather. He expects second quarter GDP growth to come in north of 4% and continual market gains.

The revision, BEA explained in a release, was largely due to a smaller than previously estimated increase in personal consumption and larger than previously estimated decline in exports. The 2.9% decrease in real GDP reflected the negative contribution from exports as well as declines in private inventory investment, both residential and nonresidential, fixed investment and lower local government spending. The rate was also negatively impacted by an increase in imports but partially offset by an increase in federal government spending (the first in a year and a half) and in personal consumption. (The remaining text is not included in this sample.)

1) HSBC raised its 2014 GDP forecast from 7.4% to 7.5%, surprised by the strong recovery especially in June. Monthly fixed asset investment and industrial production grew by 17.9% and 9.2% respectively, compared with 16.9% and 8.8% in May.

The strong recovery was largely driven by government policies. State-owned bank lending picked up strongly; fiscal spending grew by almost 25% in both May and June, up from an average of 8% from January through April. HSBC believes China’s GDP growth could exceed its 7.5% forecast if more easing comes over the next few months. "Policies, particularly fiscal policy, will likely be more supportive in 2H as it is traditionally the spending season," wrote HSBC economists Qu Hongbin and Julia Wang.

China’s property sector continues to be the main downside risk, says HSBC, but "our baseline case remains that policymakers can offset the negative impact given that they have a broad range of policy tools at their disposal."

In June, property prices in 55 out of 70 cities surveyed fell, up from 35 cities in May and just 8 in April. Local governments have been taking steps to prop up real estate markets, using measures such as abolishing local resident purchase requirements. (The remaining text is not included in this sample.)

German gross domestic product stalled in the second quarter as geopolitical concerns weighed on industrial output and construction weakened after a weather-induced boom in the first three months of the year, the Bundesbank said.

The warning, contained in the central bank's monthly bulletin, is an indication that the euro zone will struggle to improve on the first quarter's meager growth rate.

Germany accounts for about 30% of the bloc's GDP. During the first quarter, euro zone GDP expanded just 0.8% at an annualized rate, or 0.2% on a quarterly basis, despite annualized growth of 3.3% in Germany. Excluding Europe's largest economy, the euro zone economy will have contracted slightly in the first quarter.

"Considering that the service sector is likely continued to expand, the real, adjusted gross domestic product (in Germany) was likely unchanged from the first quarter," the Bundesbank said. "Geopolitical tensions are reflected not only in weaker future indicator surveys, but also in ebbing demand for interim goods." (The remaining text is not included in this sample.)

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