Safe you Finance

The U.S. economy took a first step toward recovering from the worst recession since the 1930s in the second quarter as companies reduced inventories, spending started to climb and profits grew.

Gross domestic product shrank at a 1 percent annual rate from April to June, less than the 1.5 percent decline projected by economists in a Bloomberg News survey, a Commerce Department report showed Thursday in Washington. Corporate earnings rose by the most in four years, the department also said.

Government programs, including "Cash for Clunkers" and first-time homebuyer incentives, are boosting manufacturing and housing, indicating the gain in sales that began last quarter will be sustained in the second half of the year.

"We’re on a pretty decent recovery path," said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. "There was a better mix last quarter with almost every major component of final demand being revised up and inventories being revised down. That puts us in a pretty decent position going into the third quarter."

Corporate profits, not included in the advance GDP estimate released in July, rose 5.7 percent from the first three months of the year, the biggest increase since the first quarter of 2005.

The median GDP forecast was based on a Bloomberg survey of 75 economists. Estimates ranged from declines of 1.8 percent to 0.8 percent. Thursday’s reading matched the government’s initial calculation issued last month and followed a 6.4 percent pace of contraction in the first three months of the year.

The drop in GDP was the fourth in a row, the longest contraction since quarterly records began in 1947. The world’s largest economy has shrunk 3.9 percent since last year’s second quarter, making this the deepest recession since the Great Depression.

Thursday’s report is the second of three estimates on second-quarter growth. The figures will be revised again in September as more information becomes available.

Consumer spending, which accounts for about 70 percent of the economy, fell at a 1 percent pace, less than anticipated, following a 0.6 percent increase in the prior quarter. Purchases were forecast to drop 1.3 percent.

Source