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Economy Shrank at Slower Pace in 1Q Than Previously Thought
Despite a slight upgrade from a prior government report, the economy shrank at a drastic pace in the 1Q, but many analysts note that the economy is not contracting as much now and that the worst is over. The Commerce Department reported that the nation's gross domestic product fell at an annual rate of 5.7%, slightly better than its previous estimate of a 6.1% drop. That followed an even bigger decline in the 4Q, when the economy shrank at a 6.3% annual rate, the biggest drop in a quarter century. The recession, which started in December 2007 and is now the longest since World War II, has resulted in 5.7 million job losses, the decline of banks and other financial institutions, a spike in home foreclosures and a severe drop in consumer spending. Much of the weakness in the 1Q came from severe spending cuts at the nation's businesses on equipment and other things. Consumer spending actually grew at a 1.5% pace - down from the 2.2% pace previously estimated – which was a big improvement from the 4Q. Economists are hopeful that the economy isn't shrinking nearly as much in the current 2Q as the recession eases its grip. Forecasters at the National Association for Business Economics, predict the economy will contract at a 1.8% annual rate in the 2Q.
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Date Last Updated: 06/03/2009
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