U.S. Economy Shows Sign Of Recovery As Q1 GDP Contracts By 5.5%

Mayur Pahilajani - AHN News Writer

Washington, D.C. (AHN) - An official report showed Thursday that the U.S.'s economy continued to contract in the first three months of 2009 as the gross domestic product shrank, during the worst recession in over 60 years, but was not as steep as expected, which could be a positive sign.
The first quarter's real gross domestic product contracted by 5.5 on annualized seasonally adjusted rate, from the previous quarter's drop of 6.3 percent, according to the final estimate released by the Commerce Department on Thursday.
Real gross domestic product (GDP) is the measure of the value of goods and services produced in the world's largest economy. The final estimate of quarterly growth today reflected negative contributions from exports, equipment and software, private inventory investment, nonresidential structures, and residential fixed investment.
These factors partly offset by a positive contribution from personal consumption expenditures (PCE). Imports, which are a subtraction in the calculation of GDP, decreased
The market analysts had expected the U.S. economy for the January to March quarter to decline on annualized basis by 5.7 percent.
The economists expect the U.S. economy to fall in second quarter ending June 30 by 1.5 percent on annual rate, but it would be less then the current estimation.
In April, they were expecting the second quarter GDP to contract by 1.9 percent, while in the quarter starting
One feature of economic data releases has been the revisions to the previous month's data. Today's report showed an upward revision, indicating an improving situation. This is expected to boost traders' confidence in data.
In the last four quarters, the U.S. economy has slipped by 2.5 percent, which is considered to be the largest year-over-year drop since 1982. The GDP index had increased by 1.1 percent in 2008 on an annual basis, compared with an increase of 2.0 percent in 2007.
Excluding food and energy prices, the price index for gross domestic purchases was unrevised at 1.4 percent in the first quarter, after moving up by 0.9 percent in the fourth quarter, the report noted.
Spending by consumers, or real personal consumption expenditures, in the quarter increased by 1.4 percent rate, compared with a decrease of 4.3 percent in the fourth quarter.
Real nonresidential fixed investment decreased by 37.3 percent, followed by investment in housing slipped by 38.8 percent amid already declining real estate sales.
The report showed that exports of goods and services were down by 30.6 percent in the first quarter, compared with a decrease of 23.6 percent in the fourth.
Imports of goods and services in the quarter decreased by 36.4 percent, compared with a decline of 17.5 percent.

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