Economy Contracts for Third-Consecutive Quarter

April 29, 2009
Consumer spending rebounds but not enough to offset declines in other U.S. economic segments

The U.S. economy fell at a 6.1% rate in the first quarter as the recession intensified in business investment even as consumer activity rebounded, official data showed April 29.

The Commerce Department's first estimate of gross domestic product (GDP) was a disappointment to forecasters expecting a 4.7% annualized decline, and marked only a marginal improvement over the 6.3% drop in the fourth quarter of 2008.

The decline marked the third-consecutive quarter of contraction for the world's biggest economy, which had not occurred since 1974-1975.

The steep fall was the result of falling exports, declines in business and household investment and a weak housing market, offset in part by improved consumer spending.

Consumer spending rebounded in the quarter, growing 2.2% after falling 4.3% in the last quarter of 2008.

But even though consumer activity makes up the lion's share of activity, it was not enough to offset hefty declines in other segments of the economy.

Cary Leahey, senior economist at Decision Economics, said that while the report was worse than expected, "it isn't necessarily bad news for the remainder of the year."

"Consumer spending rose after unprecedented declines, but we've gone into a deeper capital spending pothole."

Still, Leahey said that with consumer spending and the housing sector appearing to stabilize, "that means the worst of the recession is behind us."

Copyright Agence France-Presse, 2009

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