The U.S. economy probably contracted even more in the first quarter than currently estimated as spending on health-care services unexpectedly dropped, according to analysts at JPMorgan Chase & Co. and Pierpont Securities LLC.
Quarterly data on services issued Wednesday by the Census Bureau showed health-care outlays dropped at a 5.8 percent annualized rate from January through March compared with the government’s current estimate of a 9.7 percent gain, said Daniel Silver, a JPMorgan economist in New York, based on the bank’s own seasonal adjustment. The pullback means gross domestic product shrank at about a 1.6 percent pace in the first three months of the year, according to JPMorgan’s calculations.
The world’s largest economy contracted at a 1 percent rate in the first quarter, the first drop in three years, as companies added to inventories at a slower pace and curtailed investment, according to revised figures issued May 29. The numbers will be revised again on June 25 as more data, including the information on services issued Wednesday, become available.
Wednesday’s report “should mean there’s a downward revision,” Silver said in an interview. The “first quarter is going to be weaker.”