GDP Numbers Out – Shrank At 0.7% Rate

The worst U.S. recession since the Great Depression eased more than anticipated in the second quarter, setting the stage for a recovery to take hold in the last half of 2009.

The world’s largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, revised figures from the Commerce Department showed today in Washington. Gross domestic product contracted at a 6.4 percent pace in the first three months of 2009.

Government stimulus plans such as “cash for clunkers” and first-time homebuyer credits are giving manufacturing and housing, the two areas at the center of the economic slump, a boost this quarter. Federal Reserve policy makers are among those concerned that gains in consumer spending will not be sustained as unemployment climbs and incomes stagnate.

“It’s a much better picture than a few months ago,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. “Inventories and government programs will drive growth in the second half. We’re expecting a mild recovery as the job market is still very weak.”

The drop in GDP, the sum of all goods and services produced, was less than the 1.2 percent median forecast in a Bloomberg survey of 78 economists. Estimates ranged from declines of 1 percent to 1.5 percent. The government previously calculated the pace of contraction at 1 percent last quarter.