Gross domestic product dropped at a 6.1 percent annual pace, more than forecast, after contracting at a 6.3 percent rate in the last three months of 2008, the Commerce Department said today in Washington. The report, which marked the weakest six months since 1957-58, comes as Federal Reserve policy makers meet for a second day.
Smaller stockpiles may set the stage for a return to growth in the second half of the year amid signs Fed efforts to reduce borrowing costs and unclog lending are starting to pay off. The recession persisted even as lower gasoline prices and larger tax refunds helped bring an end to the worst slump in consumer spending in almost three decades.
The world’s largest economy shrank 2.6 percent in the first quarter compared with the same period a year earlier. Today’s advance report on GDP is the first of three estimates on first- quarter growth.
Consumer spending, which accounts for about 70 percent of the economy, climbed at a 2.2 percent annual pace last quarter, the most in two years. Purchases dropped at an average 4.1 percent rate in the last half of 2008, the biggest slide since 1980.
Companies trimmed stockpiles at a $103.7 billion annual rate last quarter, the biggest drop since records began in 1947. Excluding the reduction, the economy would have contracted at a 3.4 percent pace.
Companies cut total spending, including equipment, software and construction projects, at a record 38 percent annual pace.
Residential construction also decreased at a 38 percent pace last quarter, the most since 1980.
One reason for the larger-than-projected decline in GDP was that government slashed spending at a 3.9 percent pace, the most since 1995. The drop reflected cutbacks in defense spending and the biggest decrease in state and local government outlays since 1981.
A smaller trade gap added 2 percentage points to growth last quarter. The deficit shrank as imports collapsed at a 34 percent annual pace, the most since 1975, which reflected the reduction in stockpiles.