US in worst recession for 50 years

US in worst recession for 50 years

The US economy slowed by an annualised rate of 6.1pc in the first quarter, confirming the current downturn is the worst American recession in 50 years.

By James Quinn Wall Street Correspondent
Last Updated: 10:12PM BST 29 Apr 2009

Poor, tired, huddled masses: not since the presidency of Dwight D Eisenhower 50 years ago has America experienced such an economic downturn However, the GDP figures from the US Commerce Department gave hope that America is seeing "green shoots" emerge, thanks to a return in consumer spending in some parts of the economy.

The data came ahead of yesterday's meeting of the Federal Reserve's Open Markets Committee (FOMC) which was expected to maintain its base interest rate at a range of 0pc-0.25pc.

The world's largest economy has now shrunk by 3.3pc since its peak last year, making this the worst recession since the 1957-58 slump, when GDP fell by 3.8pc. In addition, it is the first time since the 1974-75 downturn that America has recorded third consecutive quarters of negative growth.

The headline figure of a 6.1pc slump, on top of a 6.3pc contraction in the fourth quarter of 2008, was worse than the 4.6pc slide for the three months to March economists had expected.

But, in spite of better-than-expected consumer spending, businesses drastically cut spending and inventories, and the government sector, which has been propping up the US economy in recent months, also spent less than forecast.

The GDP figures are seen as possibly the most important read on the state of any country's economy, and are an indicator to production across the economy.

Consumer spending makes up approximately 70pc of US GDP, and the fact that it rose by 2.2pc in the first quarter – after dropping 4.3pc in the fourth quarter – is a positive sign amongst the gloom.

But increased consumption could not mask falls in other parts of the economy, such as a 34pc annualised slide in equipment and software, or a 38pc slide in residential investment.

Exports collapsed by 30pc, the biggest fall since 1969, while investment by business fell a record 37.9pc.

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5245603/US-in-worst-recession-for-50-years.html