Washington - An end to the brutal recession gripping the US economy is in sight after a year and a half, but recovery could be tepid and uneven, analysts said after a better-than-expected snapshot of US output.
The Commerce Department's first estimate Friday on gross domestic product (GDP) showed a 1.0% annualized decline, stronger than expected by private forecasters who had called an average 1.5 percent drop.
The figures, while still negative, showed a massive improvement after a revised 6.4 percent tumble in economic activity in the first quarter.
Analysts said the data set the stage for a rebound in the second half of the year, yet few were celebrating.
The data suggests "that the US economy is at or very near the bottom of the deepest recession of the postwar period," said Nariman Behravesh, chief economist at IHS Global Insight.
"However, the early phases of the recovery are likely to be quite weak. We expect growth of only 1.0% to 1.5% in the fourth quarter of 2009 and first quarter of 2010. After that, we expect growth to pick up gradually, and exceed 3.0% by the end of 2010."
Scott Brown, chief economist at Raymond James & Associates, said the report showed "signs of stabilization in a lot of areas of the economy, so the worst is definitely behind us."
Brown added: "We are close to a bottom in the overall economy but the recovery will be weak with continuing problems in the labour market."
Many private and government economists see a return to growth in the second half of the year, although some warn that rising unemployment could dampen any recovery.
The jobless rate hit a 26-year high of 9.5% in June amid more retrenchment by employers. Some expect the jobless rate to rise to 10% or higher.
Patrick O'Hare at Briefing.com said the stock market gave a lukewarm welcome to the data.
"This disappointment was a reminder that the economic recovery will be an uneven affair, quite simply because the US consumer isn't what he/she used to be in the face of rising unemployment and falling home values," O'Hare said.
Consumer spending, the main driver of economic activity, fell 1.2% after a rise of 0.6% in the first quarter.
Bart Van Ark, chief economist at the Conference Board, said the report offers no hope for a quick "V-shaped" recovery.
Van Ark said the GDP data "confirms that the path to recovery remains a long haul, with more disappointments likely in the months to come."
"Consumer spending came out worse than expected and is likely to remain weak into the third quarter because of ongoing clogging in income and credit channels," he added.
Many segments of the economy remained extremely weak, GDP data showed. Private investment was down 20.4%, but that was better than a 50% plunge in the first quarter.
The report showed positive contributions came from government spending, increased auto production and trade.
Real final sales of domestic product - a key figure that strips out inventory adjustments - showed a 0.2% drop in the second quarter, compared with a decrease of 4.1%in the first.
Whether the slump is over will be determined by the National Bureau of Economic Research, a panel of economists which uses a variety of factors in addition to the conventional definition of recession as two consecutive quarters of decline.
But Ryan Sweet at Moody's Economy.com said the GDP report sets the stage for a good rebound.
He said the data showed "a shift in business behaviour away from retrenchment," and noted that a drawdown in inventories means businesses will now ramp up production, adding to growth.
"GDP growth this quarter will likely be stronger than our current forecast of a 1.0%," he said.
Joel Naroff at Naroff Economic Advisors said he believes consumer spending will pick up, helped by the government's "cash for clunkers" incentives for car buyers.
"This report raises the possibility that we could get a very strong quarter," he said. "It could be either the third or fourth quarter and could approach or even exceed 5.0%. That would come from a huge swing in inventories and improvements in residential construction and business spending."
But he said this would not last: "Once the volatility settles down, growth is likely to be quite soft."
- AFP