Friday July 31, 08:45 AM
US GDP will offer clues on end of recession
WASHINGTON (AFP) - A keenly anticipated report Friday will answer many questions on whether the US economy is emerging from its long and brutal recession, and the strength of an expected recovery.
The preliminary report on gross domestic product (GDP), or the output of goods and services in the second quarter, is to be released by the Commerce Department at 1230 GMT.
The report, which covers the April-June period, is expected to offer important clues on whether economic momentum is returning from a recession that began in December 2007 and has been the worst slump in decades.
The consensus forecast of private economists suggests the GDP report will show an annualized decline of 1.5 percent -- still negative but a big improvement after a 5.5 percent slump in the first quarter and a 6.3 percent drop in the fourth quarter of 2008.
President Barack Obama, who earlier this week said he sees "the beginning of the end of the recession," indicated Thursday he expected a negative figure for GDP.
"I suspect that GDP numbers will still show that the economy contracted in the second quarter," Obama told reporters at the White House.
Obama, echoing the expectations of forecasters who see growth resuming in the second half of 2009, sounded an optimistic tone about the economy.
"We have seen a significant slowing down of the contraction over the last several months," Obama said, pointing to a slowing of job and output losses, and an easing of credit markets.
"All of that is a sign that we have stepped away from the precipice."
"We were in a position where we could have gone into a great depression. I think those fears have abated."
Some analysts fear that rising joblessness could crimp a recovery or possibly lead to a "double dip" recession. The lack of jobs will hurt income and spending, which will drive any recovery.
Ian Shepherdson at High Frequency Economics said he expects the GDP figure Friday to be positive, although no cause for celebration.
Even after some weak data for June, Shepherdson said, "we still think the economy expanded a bit, albeit at a 0.5 percent pace, compared to the consensus forecast of a 1.5 percent contraction."
Shepherdson said his forecast is predicated on stronger government spending and some restocking of inventories by businesses that curbed production earlier in the year.
He said an unknown factor is trade, which will be estimated by the Commerce Department and could change the GDP figure in revisions over the next two months.
Barclays Capital Research is holding to its forecast in line with the consensus for a 1.5 percent decline.
Barclays (LSE: BARC.L - news) ' economists said they expect the report to show "another quarter of massive inventory liquidation as businesses slashed production to bring inventories in line with the lower level of sales."
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