The U.S. economy shrank less than expected in the second quarter as businesses and consumers trimmed their spending at a slower pace, buttressing beliefs that the economy is now growing.
The small dip in gross domestic product for the April-June quarter follows the 6.4 percent annualized drop in the first three months of this year, the worst slide in nearly three decades. In the final quarter of last year, the economy sank at a rate of 5.4 percent
The new reading on second-quarter GDP, reported today by the Commerce Department, shows the economy shrinking less than the 1 percent pace previously estimated. It also was better than the annualized 1.1 percent drop that economists were predicting.
The final revision of second-quarter GDP comes on the last day of the third quarter, in which many analysts predict the economy started growing again at a pace of about 3 percent.
“Growth should be solidly positive,” said Mark Vitner, economist at Wells Fargo Securities.
Gross domestic product measures the value of all goods and services — from machines to manicures — produced in the U.S. It is the best estimate of the nation’s economic health.
A main reason for the second-quarter upgrade: businesses didn’t cut back spending on equipment and software nearly as deeply as the government had thought. Consumers also didn’t trim their spending as much.
Many analysts predict the economy started growing again in the July-September quarter, due partly to President Barack Obama’s $787 billion stimulus package and the government’s now defunct Cash for Clunkers program, which had ginned up auto sales. It offered people rebates of up to $4,500 to buy new cars and trade in less efficient gas guzzlers.
Earlier this month, Federal Reserve Chairman Ben Bernanke said the recession, which started in December 2007, is “very likely over.”
But he warned that pain will persist — especially for the nearly 15 million unemployed Americans. (AP)
