US economy contracts in second quarter; underlying data show no recession

The US economy contracted at a more moderate pace than initially thought in the second quarter as consumer spending blunted some of the drag from a slower pace of inventory accumulation, dispelling fears that a recession was underway, Reuters reports.

That was underscored by the report from the Commerce Department on Thursday, which also showed the economy growing steadily last quarter when measured from the income side. This fits in with recent solid readings on the labor market, retail sales and industrial production.

Gross domestic product shrank at a 0.6% annualized rate last quarter, the government said in its second estimate of GDP. That was an upward revision from the previously estimated 0.9% pace of decline. The economy contracted at a 1.6% rate in the first quarter. Economists polled by Reuters had expected GDP would be revised slightly up to show output falling at a 0.8% rate.

While the two straight quarterly decreases in GDP meet the standard definition of a technical recession, broader measures of economic activity suggest a slow pace of expansion rather than a downturn.

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