U.S. Economy in 2nd Straight Quarter of Steep Decline

The American economy shrank rapidly in the first three months of the year, the government reported on Wednesday, a signal that the economy is likely to remain a dominant issue as the Obama administration looks beyond its first 100 days.

The gross domestic product shrank at an annual rate of 6.1 percent from January through March, the Bureau of Economic Analysis reported. It was the third straight quarter of declines and capped the worst six months of economic activity since the late 1950’s.

Economists had predicted a drop of 4.7 percent, and the steep dip could dampen hopes that the pace of economic declines had begun to ebb. The decline was almost as sharp as in the previous quarter, when the economy shrank at a pace of 6.3 percent, its worst drop in a generation.

A plunge in business investment contributed to much of the overall decline in the nation’s economic output.

Companies slashed their capital investment at an annual rate of 38 percent, and cut their inventories at a pace of $103.7 billion as they rushed to reduce their costs. Business investment in software and equipment declined by an annualized 33.8 percent, and investment in new structures was down 44.2 percent.

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