Troubling news this morning on the state of the U.S. economy. A month ago, the Commerce Department reported that gross domestic product had expanded at a paltry 0.1 percent annual rate in the first three months of the year.

That figure was revised downward today, and now the Commerce Department says the economy actually shrank at a 1% annual rate in that period. It was the first period of economic contraction in three years.

Here's more on the numbers from Fox Business:

It was the worst performance since the first quarter of 2011 and reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit.

The government had previously estimated GDP growth expanding at a 0.1 percent rate. It is not unusual for the government to make sharp revisions to GDP numbers as it does not have complete data when it makes its initial estimates.

The decline in output, which also reflected a plunge in business spending on nonresidential structures, was sharper than Wall Street's expectations. Economists had expected the revision to show GDP contracting at a 0.5 percent rate.

The economy grew at a 2.6 percent pace in the fourth quarter. U.S. financial markets are likely to shrug off the report, given the temporary factors that weighed down on growth and the fact that economic activity is rebounding.

Data ranging from employment to manufacturing suggests growth will accelerate sharply in the second quarter.

Economists estimate severe weather could have chopped off as much as 1.5 percentage points from GDP growth. The government, however, gave no details on the impact of the weather.

Businesses accumulated $49.0 billion worth of inventories, far less than the $87.4 billion estimated last month.

It was the smallest amount in a year and left inventories subtracting 1.62 percentage points from first-quarter growth. But inventories should be a boost to second-quarter growth.

While the decline in exports was not as severe as initially thought, import growth was stronger. That resulted in a trade deficit that sliced off 0.95 percentage point from GDP growth.

A measure of domestic demand that strips out exports and inventories expanded at a 1.6 percent rate, rather than a 1.5 percent rate, indicating underlying strength in the economy.

Stuart Varney sat down with Bill Hemmer this morning to assess the situation, pointing out that even pessimists didn't predict that the numbers would get this bad.

Varney explained that this figure means that the chances of getting to 3% growth for all of 2014 are "slim and none."

"For four years in a row we've had a hope that maybe we'd get to 3% growth. The promised land. Four years in a row those hopes have been dashed," he said, explaining that President Obama's strategies for getting the economy going again are totally opposite from the GOP.

Varney said the president wants more taxes and more spending on infrastructure, while the Republicans call for lower tax rates to try to stimulate the private sector.

See more from Stuart each day on Varney & Co. at 11a ET on Fox Business Network.