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Economy shrinks for third straight quarter


The U.S. economy took a larger-than-expected dive during the first quarter, weighed down by declines in exports and business inventories, Reuters reported.

According to data released today by the Commerce Department, the gross domestic product (GDP) dropped at a 6.1 percent annual rate, after contracting at a 6.3 percent pace during the fourth quarter of 2008. Analysts polled by Reuters had expected the GDP, which measures the total output of goods and services within U.S. borders, to decrease at a 4.9 percent clip during the January-through-March quarter.

This marks the first time since 1974-75 that output has declined for three straight quarters.

Business inventories decreased by $103.7 billion in the first quarter, which accounted for 2.79 percentage points of the drop, and exports decreased 30 percent, after decreasing 23.6 percent in the fourth quarter. The decline, the biggest since 1969, knocked a record 4.06 percentage points from the GDP.

The Commerce Department said the government’s stimulus package, which was designed to bolster spending, had very little impact on first-quarter GDP. Instead, state and local government spending decreased at a 3.9 percent rate in the first quarter, its largest decline since 1981.

Click here to read the Business Record’s article on the GDP’s fourth-quarter performance.

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