The Commerce Department reports that the US economy shrank 6.1% for the first quarter with worse than expected showings in inventories and housing.
Writing for Bloomberg, Bob Willis reports the dismal figures:
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.
"This is one of those good-bad numbers," Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, said in a Bloomberg Television interview. "Businesses are running about as lean as they possibly can be. It sets up the reality that any sort of increase in demand will cause firms to have to increase production."
As a result, Naroff predicted growth won't "be nearly as bad in the current quarter, and will probably be reasonably good."
What is not mentioned is the uncertainty felt by many businesses over the Obama Administration's efforts at nationalization and takeovers. This is reflected in the low inventories as well as continued high unemployment as corporations will not begin hiring again until they are sure the economy is out of the woods.
The 6.1% decline is greater than the 4.7% that was expected in a survey of 71 economists.
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