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Published: Thursday, 10/1/2009

GDP declines at slower rate than expected in second quarter


WASHINGTON - The economy shrank less than expected in the second quarter as businesses and consumers trimmed their spending at a slower pace, buttressing beliefs that the economy is now growing.

The 0.7 percent dip in gross domestic product for the April-June quarter follows the 6.4 percent annualized drop in the first three months of this year, the worst slide in nearly three decades. In the final quarter of last year, the economy sank at a rate of 5.4 percent.

The new reading on second-quarter GDP, reported by the Commerce Department yesterday, shows the economy shrinking less than the 1 percent pace previously estimated.

It also was better than the annualized 1.1 percent drop that economists predicted.

The final revision of second-quarter GDP comes on the last day of the third quarter, in which many analysts predict the economy started growing again at a pace of about 3 percent.

"Growth should be solidly positive," said Mark Vitner, economist at Wells Fargo Securities.

Gross domestic product mea-sures the value of all goods and services - from machines to manicures - produced in the United States. It is the best estimate of the nation's economic health.

A main reason for the second-quarter upgrade: Businesses didn't cut back spending on equipment and software nearly as deeply as the government had thought. Consumers also didn't trim their spending as much.

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