The US economy has shrunken at its fastest rate since the depths of the recession five years ago as it emerged that the harsh winter took a far bigger toll on activity than previously estimated.

Official data released in Washington showed that output as measured by gross domestic product fell at an annual rate of 2.9% in the first three months of 2014.

Originally, the Department of Commerce had said output rose by 0.1% at an annual rate in the quarter ending March before adjusting this to a 1% decline. The gap between the second and the third estimates was the largest on record.

Wall Street was taken unawares by the size of the downward revision to growth in the world's biggest economy, with the consensus believing that growth would be down by 1.7% at an annual rate. But it expressed confidence that the US would quickly bounce back from a weather-affected start to 2014 by posting strong growth in the second quarter.

Nancy Curtin, the chief investment officer of Close Brothers Asset Management said: "The US economy didn't just grind to a halt in the first quarter – it hit reverse as the polar vortex took its toll. But we can't judge current growth by looking in the rear-view mirror, and we are unlikely to see investors react strongly to what is now quite a long way behind us.

"More recent data have pointed to the economy picking up speed. Manufacturing is at a four year high, while the housing market is looking positive once more. It's clear that growth has gone up through the gears in Q2, and we'll see this reflected in the next GDP reading."

Officials at the commerce department said the downward revision to growth had been the result of lower consumer spending on health care and a weaker than previously estimated contribution from exports. © Guardian News and Media 2014