U.S. economy shrank at an alarming rate

U.S. GDP fell at an annualized rate of 6.1% in the first quarter of this year according to data released on Wednesday April 29th.

The world’s largest economy has now contracted for three quarterly periods in a row. The fall was bigger than most had expected, and puts the cumulative shrinkage so far during this recession on a par with those in the downturns of 1973-75 and 1981-82, the worst of the post-war period.

Much of the fall was due to businesses slashing inventories to cope with drops in sales. Consumer spending actually rose by 2.2% at an annual rate, led by rising purchases of cars and other durable goods after a disastrous 2008, but much of this was offset by a sickening plunge in business investment, which fell at a 38% annual rate, the steepest on record. That is the steepest decline since records began, beating the old record set back in 1952, according to Morgan Stanley.