US suffers decline of 5.5% in Q1 GDP

By Jeannine Aversa  |   2009-6-26  |     NEWSPAPER EDITION

THE United States economy tumbled 5 percent in the first quarter, although it appears to be doing better now.

The revised reading on the gross domestic product, released yesterday by the Commerce Department, showed the economy from January through March didn't fall as deeply as the 5.7-percent annualized decline reported a month ago.

Economists were predicting the government would stick with its previous estimate.

The main forces behind the small upgrade were businesses that didn't cut stockpiles of goods as much and imports that dropped more sharply than previously estimated.

Meanwhile, the rebound in consumer spending was a little less energetic.

Consumers raised their spending by 1.4 percent, down from a 1.5-percent growth rate estimated last month. Still, it marked the strongest showing in nearly two years and a huge improvement from the fourth quarter when consumers slashed spending by the most in nearly three decades.

All told, the report showed the economic damage inflicted by the recession, the longest since World War II. The worst financial crisis since the 1930s, a housing bust and hard-to-get credit have eaten into businesses' sales and profits, forcing them to cut back production and jobs. In the final quarter of last year, the economy plunged at a 6.3-percent annualized pace, the most in a quarter-century.

Many analysts believe the economy isn't sinking nearly as much now as the recession eases its grip on the country.