The US economy contracted at a slower-than-expected pace in the second quarter as the slump in business and residential investment moderated sharply, according to government data today that backed views the recession was winding down.
Gross domestic product, which measures total goods and services output within US borders, fell at a 1 per cent annual rate, the Commerce Department said, after tumbling 6.4 per cent in the January-March quarter, the biggest decline since a matching fall in the first quarter of 1982. It was previously reported as a 5.5 per cent drop.
With the contraction in the second quarter, US GDP has fallen for four straight quarters for the first time since government records started in 1947.
Analysts polled by Reuters had forecast GDP falling at a 1.5 per cent rate in the second quarter.
The advance report showed business investment decreased at an 8.9 per cent rate in the second quarter after diving 39.2 per cent in the previous quarter. Investment in nonresidential structures fell at an 8.9 per cent rate compared to a 43.6 per cent drop in the first quarter.
Residential investment, which is at the core of the longest recession since the Great Depression, dropped at a 29.3 per cent rate in the April-June period after plummeting by 38.2 per cent in the first quarter.
Business inventories continued to be a drag on overall GDP, declining by a record $141.1 billion in the second quarter as firms aggressively cut back on new production to reduce stockpiles of unsold goods. Inventories fell by $113.9 billion in the first quarter. The drop in inventories shaved 0.83 percentage points from second-quarter GDP. Excluding inventories, GDP fell 0.2 per cent in the second quarter compared to a 4.1 per cent decline in the first quarter, the department said.
Consumer spending, which accounts for over two-thirds of US economic activity, fell at a 1.2 per cent rate in the second quarter after rising 0.6 per cent in the previous quarter. The freefall in exports braked sharply in the second quarter.
Exports fell at a 7 per cent rate after plunging 29.9 per cent in the first quarter. There were positive contributions from the federal, state and local government during the second quarter.
Annual benchmark revisions issued by the department showed the economy barely grew in 2008, expanding at an annual rate of 0.4 per cent, the smallest since 1991, instead of the 1.1 per cent previously estimated.
Reuters