2nd Quarter GDP Down Only 1 Percent

NEW YORK (CNNMoney.com) — The pace of economic decline slowed substantially in the second quarter, as the U.S. economy shrank at an annual rate of 1% — far less than it did in the first quarter, according to a government report released Friday.

Economists surveyed on Briefing.com expected the second-quarter reading to show the economy contracted at an annual rate of 1.5%.

The economy has been mired in recession since December 2007, worsening in recent quarters. The fourth quarter of 2008 and first quarter of 2009 measured the worst two quarterly declines in 26 years — the nation’s gross domestic product fell a revised 5.4% and 6.4% respectively.

The slower second-quarter contraction was largely due to a smaller decline in exports as consumer prices and government spending rocketed higher.

That partially offset a 1.2% decline in consumer spending in the second quarter, which makes up about 70% of GDP. The decline in business inventories also took a significantly smaller bite out of GDP last quarter than in the previous two quarters.

GDP, the broadest measure of economic activity, has contracted for four straight quarters — the first time that has happened since the Commerce Department began tracking that measure in 1947. But the most recent quarterly decline is the smallest since the third quarter of 2008, giving hope to some economists that the recession is at or nearing an end.

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14 Responses to “2nd Quarter GDP Down Only 1 Percent”


  1. 1 James Dugger July 31, 2009 at 2:37 PM

    I would love to be optimistic, but it still declined and it doesn’t appear to me it’s going to get better. Forclosures continue to rise…

    http://www.credit.com/news/housing-market/2009-07-31/foreclosures-rise-for-many-parts-of-the-country.html

    http://www.boston.com/realestate/news/blogs/renow/2009/07/the_second_fore.html

    http://www.philly.com/inquirer/business/20090731_U_S__foreclosures_spreading_to_regions_formerly_spared.html

    Unemployment continues to rise as well, even if it’s at a slower pace. After the fast and large amount of layoffs the first few months of this year, it isn’t surprising that it did ease a little. It doesn’t show that the recession is over by any means. We really won’t know it’s over until we are out of it.

    Also – with all these foreclosures, how are banks posting profits? Sleight of hand accounting. I think (though hopefully wrong)we’ll be suffering through this for years to come.

  2. 2 Lauren Swartz July 31, 2009 at 2:47 PM

    Today the Labor Department also released a report stating that American’s incomes had increased by the smallest percentage EVER. While the contraction of the economy might be becoming less severe, its clear from reports like this that economic growth is still severely impacted by the recssion. Further, it’s statistics like these that are “real” for Americans. The status of the GDP is an abstract concept for most non-economists but reductions in the benefits employers offer, lay-offs, and wage cuts are much more concrete. The recession may have bottomed out, but real people are still really hurting.

  3. 3 James Dugger July 31, 2009 at 3:51 PM

    Here’s another link that shows that this recession is probably far from over, though I do hope I am wrong.

    http://finance.yahoo.com/news/Regulators-shut-banks-in-Fla-apf-2989772405.html?x=0&sec=topStories&pos=main&asset=&ccode=

    There were 26 bank Failures in 2008, we already more than doubled that in half the year in 2009. In 2007 there was 3, and it doesn’t appear like there was any in 2006 or 2005.

    http://www.fdic.gov/bank/individual/failed/banklist.html

    We still have a long way to go. At least banks are FDIC insured, unlike during the Great Depression.

  4. 4 Wen-Li Chan July 31, 2009 at 9:04 PM

    I’m still expecting the worst but hoping for the best. My cousin just got laid off recently and his former company is going to lay off more people. That doesn’t make me feel very hopefull about the economy.

  5. 5 Thomas Babcock, Japan July 31, 2009 at 11:27 PM

    Look we got a long way before we hit the bottom. How fast we get there is another thing. Best thing to do is hold on to your money and look for signs at the end of the bottom. Then start buying. Most people on this site already have a leg up on the average joe who still don’t know what is happening and willing to be a debt slave or a wage surf. STAY OUT OF DEBT. best thing to do.

  6. 6 Jessie Maguire August 1, 2009 at 4:47 PM

    I agree with Thomas, staying our of debt is the best thing one can do to avoid being blindsighted in this economy. We all want to believe that the economy is going to go back to the way it was soon, but the way it was just doesn’t cut it. People were too careless and uneducated about who they were giving their money to. This recession is a bit of a blessing in disguise in the fact that people needed to get smart when it came to their money. This idea that the economic decline slowed is good news, but if we pull out of this thing too fast we are never going to learn and we will find ourselves in this same situation in the near future.

  7. 7 James Dugger August 2, 2009 at 9:31 AM

    Unfortunately most people are in debt, and I don’t believe this recession was a blessing in disguise. It was inevitable, and it exposed the truth. The growth our economy experienced before this recession hit was a fraud, it was built on Debt. Businesses received their money up front, posting huge profits, showing “growth” and exciting investors by creating growth value in their stock. On the consumer in, they got their products now with the intentions of paying for it in the future. How long can a society keep doing that? It was inevitable for the credit market to dry up, for business to lose their growth potential and to start losing business, for consumers to lose their purchasing power that was not based on legitimate cash flow, but based on cash flow and the potential of Debt they can take on.

  8. 8 Abby August 2, 2009 at 11:29 AM

    Here’s a clip of Greenspan saying that we’re “getting very close” to the end of this recession, and moving away from a total collapse.

    http://abcnews.go.com/Video/playerIndex?id=8233042

    He reasons that as long as the financial institutions and the stock market stabilize, the broader economy will eventually follow. At this point, we should be optimistic about stabilization, because a calm needs to come before a substantial improvement.

    Also, as production and consumption rates converge, excess inventories are shrinking. As we stabilize and adjust to recession-appropriate tactics, the Fed can plan on how to really pull us back to pre-2007 GDP levels with more long-term plans.

  9. 9 Carolyne Abrams August 3, 2009 at 11:43 AM

    Wow! Tough crowd! I don’t know what people are exepecting, but there is not going to be a 5% decrease in unemployment overnight. Lower unemployment will be the last step we see, as businesses are not going to hire more people until they see more profit. Step by step, little by little – we won’t know the recession has hit rock bottom until we are coming back out of it. It will not be overnight.

  10. 10 Joseph Garcia August 3, 2009 at 11:31 PM

    Yes, we need to get out of debt before we can be back to where we were. Unfortunately, I do agree with the other posters Carolyne. As optimistic as I would like to be, realistically speaking, I do not hear talk about how well other people are doing. I hear them telling me ways they saved money, things they cut from their budget, and vacations that had to be canceled over summer. I, too, wonder how in the world banks post profits amidst the recession.

  11. 11 Jessica Tsai August 4, 2009 at 12:14 AM

    It is encouraging to hear news of recent economic improvements. There have been mistakes made in the past by consumers and producers alike regarding the way things were run. Americans were wrapped up in their view of living big and racking up credit card debt did not seem to be a dire issue. Problems were pushed off one day after the next until inevitably these faulty spending attitudes took their toll on the economy. Amidst both negative and positive perspectives on the economic situation today, we are all to hope that once we have hit rock-bottom, the only way to go next is up.

  12. 12 Dave Crider August 5, 2009 at 4:09 PM

    I can see both points of Jessica and James about the recession being a blessing in disguise or not. It certainly woke a lot of people up about their bad credit choices and hopefully will change peoples habits in the future. My wife and I had a daughter a few years ago that ended up in the hospital at 5 weeks old in need of a bone marrow transplant. The loss of my wife’s wages for the 6 month period why she had to stay with her was devastating. But that is what woke us up that we were in debt over our head and needed to change our habits. We have since became Dave Ramsey fans and have followed his plan to work our way out of it.

  13. 13 Juan Balderas-Econ 101 August 5, 2009 at 10:50 PM

    As to the “blessing in disguise” argument, I do agree that on the large nation-wide scale this has been a wake-up call that an economy based on debt can’t be sustained, and that we need to trend towards savings vs. spending. However, let’s not forget that there are individuals in all of our communities who aren’t being blessed by the recession: the couple at retirement age who DID save, but had those savings wiped out by the activity in the stock market; the worker for the small firm who got laid off because of a decrease in orders from a larger corporation; a kid who can’t get three squares a day, even though his mom’s minimum wage went up a couple quarters. It’d be great if everyone started saving more as a result of the recession, but let’s not forget the individuals who are taking this lesson the hardest.

  14. 14 Jessica Schimke August 6, 2009 at 1:17 AM

    It’s nice to see such a small number after the last two quarters. I do find it a bit unsettling to know that this is the first time since they started tracking it that GDP has shrunk in four straight quarters though. Hopefully the high percentage declines are over and we are on the way to recovery.


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