NEW YORK (TheStreet) -- The economy hasn't fully recovered since its slowdown during the first quarter, one economist said. First-quarter gross domestic product fell 0.7%, the Commerce Department said on Friday, compared to a previously reported expansion of 0.2%.

Even though GDP is a lagging indicator, the economy isn't out of the woods just yet.

"The data is still mixed," said Michael Hanson, senior U.S. economist at Bank of America Merrill Lynch. "It's definitely better than the steady stream of bad data we had earlier in the year, but it's not really compelling yet."

While cold weather and the west coast port dispute were factors, Hanson points to a wider trade deficit as one of the culprits for Friday's downward GDP revision.

Economic data are being watched extra carefully this year, as the Federal Reserve's looming rate hike sits in the backdrop, spooking investors. Low rates and unprecedented central bank intervention has helped push stocks to near record highs, leaving investors fearful of how stocks will react once the Fed pulls the trigger.

While a rate hike announcement during the Fed's June meeting in just over two weeks is unlikely, Hanson said, a September liftoff is on the table, despite lackluster economic growth during the beginning of 2015.

"The threshold for the Fed hiking may not be all that high," he added. "If inflation moves sideways and not down, that's probably good enough."

He also said an improving labor market and a rebound in economic growth during the second quarter would also point to a rate hike in September.

"The Fed's view is that unemployment is down, they're comfortable that inflation will move back toward target," he said. "In their mind, that doesn't justify zero-percent rates."

Economic data seen in recent months hasn't cooperated as much as the Fed had hoped, Hanson noted.