US economy emerging out of recession

WASHINGTON (AFP): The US economy showed signs of emerging from a long and brutal recession, according to data on Friday showing a narrower-than-expected  1.0% decline in output in the second-quarter.

The commerce department estimate on gross domestic product (GDP) was stronger than expected by private forecasters who had called on average for a 1.5% annualized pace of contraction in the April-June quarter.

The report showed an easing of the horrific slump and lent credence to predictions that the world’s biggest economy was close to emerging from a recession that began in December 2007.

“The small contraction in the economy in the second-quarter is another indication that the recession will soon end,” said Augustine Faucher, economist at Moody’s Economy.com. “Conditions are set for a rebound in the current quarter.” Scott Brown, chief economist at Raymond James & Associates, said the report showed “signs of stabilization in a lot of areas of the economy, so the worst is definitely behind us.” He added: “We are close to a bottom in the overall economy, but the recovery will be weak with continuing problems in the labour market.” The agency’s revisions showed a 6.4% decline in the first-quarter, worse than previous estimate of a 5.5% drop.

In the fourth-quarter of 2008, the drop was revised to 5.4% instead of 6.3%. Other revisions from 2008 showed a weaker GDP than originally estimated, with growth of 0.4% for the full year instead of 1.1%.

President Barack Obama’s spokesman Robert Gibbs said the GDP figures “show that we are making progress,” in righting the economy.

“We all recognize that there is a lot of work to do, particularly to get people back to work,” he said. “I think it’s very likely that when we meet here a week from today and talk about unemployment numbers, we’ll see hundreds of thousands of more jobs lost.”

Many private and government economists see a return to growth in second half of the year, although some warn that rising unemployment could dampen any recovery.

The jobless rate hit a 26-year high of 9.5% in June amid more retrenchment by employers. Some expect the jobless rate to rise to 10% or higher. Many segments of the economy remained extremely weak, the GDP data showed. Private investment was down 20.4%, but that was better than a 50% plunge in the first-quarter.