GDP Down 0.7% in Q2

Sept. 30, 2009
Better than last month's estimate of a 1% drop

The U.S. economy shrank at a 0.7% pace in the second quarter, the government said on Sept. 30 in its final revision for gross domestic product, offering more evidence of recovery from recession.

The figure was better than last month's estimate of a 1% drop in economic output, and stronger than the average estimate of private economists calling for a 1.2% annualized pace of decline.

The report appeared to confirm that the world's biggest economy was emerging from its long recession and rebounding from a hefty 6.4% decline in the first quarter of 2009.

The latest GDP report showed consumer spending, the main driver of economic activity, fell at a 0.9% pace, one-tenth of a point better than in last month's estimate.

One key factor in the GDP drop was a drawdown in inventories as businesses curbed production in the face of uncertain conditions. The inventory adjustment subtracted 1.42 percentage points from GDP in the second quarter.

Stripping out inventories, real final sales -- which some economists say is a good indication of the pace of activity -- showed a 0.7% increase in the quarter.

One of the main drags on activity came from housing -- investment in residential activity decreased 23.3% in the quarter, reflecting the deep slump in home building.

Federal government spending helped make up some of the decline, increasing 11.4% in the second quarter. State and local government consumption expenditures were up 3.9%.

Copyright Agence France-Presse, 2009

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