WORLD> America
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WORLD> America
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US economy shrinks less in second quarter
(Agencies)
Updated: 2009-09-30 22:18 Consumer spending, which normally accounts for over two-thirds of US economic activity, fell at a 0.9 percent rate in the second quarter -- smaller than the previously estimated 1.0 percent decline. Spending rose at a 0.6 percent rate in the previous quarter. Business investment fell at a 9.6 percent rate in the second quarter instead of 10.9 percent, reflecting slightly better demand for software than previously thought. It tumbled 39.2 percent in the first quarter. SPENDING STILL WEAK Weak domestic demand meant businesses continued to reduce their stock of unsold goods. Business inventories plunged by a record $160.2 billion in the second quarter rather than the $159.2 billion drop estimated by the government last month. Stockpiles of unsold goods fell by $113.9 billion in the first quarter. The drop in inventories subtracted 1.42 percentage points from second-quarter GDP, the department said. Excluding inventories, GDP rose 0.7 percent in the second quarter compared to a 4.1 percent decline in the first quarter. Rebuilding of inventories is expected to be one of the main drivers of the economy's recovery. Economists agree that the recovery, which is also aided by government spending, is already under way. However there are doubts over its strength and sustainability because of weak consumer spending as the economy continues to bleed jobs. The department said corporate profits after taxes rose 0.9 percent, much lower than the 2.9 percent it estimated last month. It compared to analysts' forecasts for 3.0 percent growth. After tax corporate profits increased 1.3 percent in the first quarter. Investment in nonresidential structures fell at a 17.3 percent rate compared to a 43.6 percent drop in the January-March quarter. Residential investment, at the heart of the worst US recession in seven decades, dropped at a 23.3 percent rate in the second quarter. It fell 38.2 percent in the first quarter. There was encouraging news on the trade front. Exports fell at a smaller 4.1 percent rate instead of the 5 percent drop reported last month, the department said. Exports plunged 29.9 percent in the first quarter. There were positive contributions from the federal, state and local government during the second quarter. A National Association of Purchasing Management-New York survey showed business activity in New York City surged to a near three-year high in September, building on recent optimism about local economic conditions. Separately, the Mortgage Bankers Association said mortgage applications fell last week despite the lowest loan rates in four months, an indication the housing market would likely recover slowly from its three-year plunge.
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