GDP declines 1% in second quarter

The economy shrank at an annual rate of 1% in the spring, a better-than-expected showing and more evidence that the recession is drawing to a close. Many analysts believe the economy is growing in the current quarter, but they caution that any rebound will not be accompanied initially by rising employment. Jobless claims figures released today were better than expected, but remain well above levels associated with a healthy economy. The Commerce Department’s new estimate for the gross domestic product was unchanged from the initial figure it released last month. The drop, while representing a record fourth consecutive decline, was far smaller than the previous two quarters. It also was stronger than the 1.5% decline that private economists expected. The report found that businesses slashed their inventories more than first reported and cut back more sharply on investment in new plants and equipment. But those reductions were offset by revisions that showed smaller dips in consumer spending, exports and housing construction. The 1% rate of decline in the April-June quarter followed decreases of 6.4% in the first quarter and 5.4% in the final three months of 2008, the sharpest back-to-back declines in a half-century. The four straight quarterly declines in GDP, which measures the country’s total output of goods and services, mark the first time that has occurred on government records that date back to 1947.