GeriGündem U.S. economy shrinks worse-than-expected 6.1 pct in Q1
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U.S. economy shrinks worse-than-expected 6.1 pct in Q1

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

The Commerce Department's first estimate of gross domestic product (GDP) was a disappointment to forecasters expecting a 4.7 percent annualized decline, and marked only a marginal improvement over the 6.3 percent 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 percent after falling 4.3 percent in the last quarter of 2008.

But even though consumer activity makes up the lions 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 delines, 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."

Investment in housing or residential structures fell 38.0 percent and spending on nonresidential business investment slumped 37.9 percent, including a 33.8 percent drop in software and equipment.

Exports tumbled 30 percent and even government investment fell 4.0 percent.

Some analysts pointed out that the figure was dragged down by massive declines in inventory stockpiling, which could mean businesses will need to ramp up production over the rest of 2009.

Subtracting inventories, the economy contracted at a 3.4 percent pace in a measurement known as real final sales.

Scott Brown, chief economist at Raymond James & Associates, said the report is consistent with an economy that is struggling to come out of a punishing recession.

"Were seeing the worst part of the decline in some sectors behind us," he said.

"There is hope for a bottom and a gradual recovery into next year."

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