The dip in gross domestic product (GDP) for the April-to-June period, reported by the Commerce Department yesterday, comes after the economy was in a free fall, tumbling at a 6.4 per cent pace in the first three months of this year. That was the sharpest downhill slide in nearly three decades. The economy has now contracted for a record four straight quarters, underscoring the grim toll of the recession on consumers and companies.
Many economists were predicting a slightly bigger 1.5 per cent annualised contraction in second-quarter GDP. It's the total value of all goods and services produced within the United States and is the best barometer of America's economic health.
Less drastic spending cuts by businesses, a resumption of spending by federal and local governments and an improved trade picture were the key forces behind the better performance.
Consumers, though, pulled back a bit. Rising unemployment, shrunken nest eggs and lower home values have weighed down their spending.
An important area where businesses ended up cutting more deeply in the spring was inventories.
They slashed spending at a record pace of US$141.1 billion. There was a silver lining to that though: with inventories at rock-bottom, businesses may need to ramp up production to satisfy customer demand. That would give a boost to the economy in the current quarter.
Even if the recession ends later this year, the job market will remain weak. Companies are expected to keep cutting payroll through the rest of this year, but analysts say that monthly job losses likely will continue to narrow. -- AP
Source: Business Times, 1 Aug 2009
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