2Q GDP Fall Less Than Expected

by Dollars and Sense

...but consumption falls more. And 1Q revised downward. From Bloomberg:

U.S. Economy: Contraction Eases as Recovery Beckons

By Shobhana Chandra

July 31 (Bloomberg) The worst U.S. economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in, while the deepest retrenchment by consumers since 1980 augured a muted recovery.

Gross domestic product shrank at a better-than-forecast 1 percent annual pace after a 6.4 percent drop the prior three months, Commerce Department figures showed today in Washington. A survey of purchasing managers showed separately that business contracted less than estimated this month.

Stabilization in homebuilding and the liquidation of unsold goods sets the stage for gains in GDP starting this quarter, analysts said. At the same time, rising unemployment and weakening income growth threaten to erode household finances; the International Monetary Fund today said policy makers must be ready to employ further stimulus if needed.

"We're heading to a sluggish recovery," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. "We'll get more support from government programs in the second half, but if you want a strong recovery you need a strong consumer, and we are not seeing that."

Stocks and Treasuries gained and the dollar remained lower against the euro after the report. The Standard & Poor's 500 Stock Index rose 0.1 percent to 987.48 in New York, the highest closing level since Nov. 4. Benchmark 10-year note yields fell to 3.48 percent at 4:33 p.m., from 3.61 percent late yesterday, and the dollar dropped 1.3 percent to $1.4257 per euro.

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Labels: bailout, economic indicators, financial crisis, GDP

 

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7/31/2009 04:52:00 PM