The U.S. economy turned in a worse-than-expected performance in the first three months of the year, contracting at a 6.1 percent annual rate — far more than the 5 percent decline analysts had expected.
The Commerce Department report on Wednesday came on the same day that the Federal Reserve said it sees signs the recession could be easing. The Fed left its key interest rate, already at zero, unchanged.
The latest gross domestic product figure, which follows a 6.3 percent annualized contraction for the fourth quarter of 2008, underscores that the worst recession since the 1930s could be a long way from over.
GDP measures the total output of goods and services. The Commerce Department's advance report comes as President Obama marks his 100th day in office, a milestone that puts a spotlight on his handling of the recession, which began in December 2007.
The Commerce report showed that business inventories fell a record $103.7 billion in the first quarter, as businesses sought to get rid of unsold stock. The emptied warehouses slashed 2.79 percentage points from the overall GDP figure. Excluding inventories, GDP contracted 3.4 percent.
Widespread Weakness Overwhelms Consumer Rebound
The report also showed reductions in exports, home building, equipment and software. Consumer spending, however, was up 2.2 percent, its biggest gain in two years.
The sharp cuts underscore the toll the recession and the loss of some 5.1 million jobs have taken on the economy, despite the government's economic stimulus plan and the Federal Reserve's move to cut a key bank lending rate to a record low near zero.
The president is counting on his $787 billion stimulus of tax cuts and increased government spending on big public works projects to help bolster economic activity later this year.
The Federal Reserve said the stimulus and the financial rescue plan should gradually help restore economic activity. It issued a slightly less pessimistic statement than at its mid-March meeting, saying that while the economy continued to contract "the pace of contraction appears to be somewhat slower."
But the recent outbreak of the swine flu poses a new danger. If the flu stifles trade and forces consumers to cut back further, it would worsen the recession.
Before the flu outbreak, Bernanke said the recession could end this year if the government succeeds in stabilizing the shaky financial system and getting banks to lend again.
From NPR staff and wire reports
Copyright 2022 NPR. To see more, visit https://www.npr.org. 9(MDYwMzgxODUyMDE2MzQ1Nzg1MTRlNTA2Yg000))