GDP Falls More Than Expected in First Quarter

Washington, DC, April 29, 2009--The U.S. economy contracted more than expected in the first quarter as business investment declined at a record rate, the Commerce Department reported Wednesday.

Real gross domestic product fell at a 6.1% annualized rate in the first quarter, nearly matching the 6.3% decline in the fourth quarter of 2008.

The two-quarter contraction is the worst in more than 50 years. Since the 1947, the economy had never contracted by more than 4% for two consecutive quarters.

With a 0.5% drop in the third quarter of 2008, it's the first time the economy has contracted for three consecutive quarters since 1975.

In the past four quarters, the economy has fallen 2.6%, the biggest year-over-year decline since 1982.

The big story for the first quarter was in the business sector, where firms halted new investments, and shed workers and inventories to bring down production and stockpiles to match the lower demand from U.S. and foreign markets.

The 6.1% decline in GDP was larger than the 5.1% contraction expected by economists.

Economists expect a 2% decline in the current quarter, followed by a tepid 1% gain in the third quarter, as the massive stimulus from Congress and the Federal Reserve kicks in.

Although the decline in GDP in the first quarter was nearly as deep as in the fourth quarter, the report was more varied in tone, with some positives mixed with some record-setting declines. Much of the drop was due to a large inventory correction, which is helping to rebalance supply and demand and is setting the stage for at least a modest recovery.

The decline in inventories, while large, was less than expected.