U.S. Economy Contracted at 5.7% Rate in First Quarter

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The U.S. economy shrank at a 5.7 percent annual pace in the first quarter, capping its worst six- month performance in five decades and reflecting declines in housing, inventories and business investment.


The contraction in gross domestic product was smaller than the government estimated last month, revised figures from the Commerce Department showed today in Washington. The drop was larger than economists had forecast, and followed a 6.3 percent tumble in the last three months of 2008.

The slowdown is forecast to ease this quarter, reflecting smaller declines in stockpiles of unsold goods and in construction, which may set the stage for a return to growth later this year. Still, companies are likely to continue cutting jobs as profits remain under pressure, causing consumers to limit spending and slowing any expansion.

“The decline in GDP will be much smaller in the second quarter and will move to positive in the third quarter,” said David Resier, chief economist at Nomura Securities International Inc. in New York, citing company inventories. “What we’ll see thereafter is not going to be particularly exciting.”

Stock-index futures, which had risen earlier in the day, remained higher after the report, while Treasuries were little changed. Contracts on the Standard & Poor’s 500 Stock Index were up 0.6 percent at 910.20 as of 8:45 a.m. in New York and yields on benchmark 10-year notes were at 3.6 percent.

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