The U.S. economy shrank at an annualized pace of 1 percent from April to June, the government reported Friday, in a clear sign that the longest postwar recession may be drawing to a close.
Most mainstream economists expected a contraction of 1.5 percent, so the data from the Commerce Department were a pleasant surprise
On top of recent signs of a bottom for housing and manufacturing, Friday’s report gave additional credibility to projections that the economy might grow, albeit slowly, in the third quarter.
Not all the news was good, however. Consumption data show continued shock for consumers, and first-quarter estimates of the economy were revised downward. The economy shrank by a 6.4 percent annualized rate in the first three months of this year, not the 5.5 percent that initially was estimated, the Commerce Department said.
“Today’s GDP numbers demonstrate that we are making real progress in ending this recession,” Commerce Secretary Gary Locke said in a statement. “Leading indicators of activity are pointing up, and the housing sector appears to be stabilizing. As more stimulus dollars hit the street, we should make headway in improving the difficult employment and financial conditions in many hard-hit regions of the country.”
Mark Zandi, an economist with Moody’s Economy.com, said the figures augured well for the economy.
“The Great Recession was more severe than previously estimated,” he said in an e-mail message, “but it sets the stage for a stronger recovery. Businesses have cleared their store shelves, warehouses and factories of unwanted inventories, laying the stage for increased production during the second half of the year. Personal saving rates are also higher, suggesting that consumers are in a better financial position to spend more in coming quarters.”
Zandi said, however, that the economy wasn’t home free yet.
“First, wages and salaries are much lower than previously estimated. Unless businesses soon curtail their job cutting, pressure on consumers to further rein in their spending will intensify,” he said. “Second, there was a lot more commercial construction in the boom at mid-decade than originally estimated. This suggests that the current downdraft in commercial real estate could be more serious than thought.”
(c) 2009, McClatchy-Tribune Information Services.