WASHINGTON -- A government report that the nation's economy contracted rather than expanded during the second quarter of this year has cast a pall on the widely held view that the recession ended last spring.
In a revised report, the Department of Commerce estimated yesterday that the gross national product, the total amount of goods and services produced by the economy, fell at an annual rate of 0.1 percent from April through June rather than rising at a 0.4 percent rate as reported a month ago.
The department said that the second-quarter dip was primarily attributable to a sharper-than-expected decline in business inventories and weaker consumer spending than had been estimated initially.
The revision is embarrassing for the Bush administration, which boasted after the initial report that the economy was growing again after posting recessionary declines of 1.6 percent in the final quarter of 1990 and 2.8 percent in the first quarter of 1991.
President Bush expressed little concern, however, when asked about the economy at the golf course near his vacation home in Kennebunkport, Maine. "I feel all right about things," he told reporters. "There's some statistics up and some down, but basically I think it's doing all right."
Indeed, analysts said that the downward revision, while unanticipated, does not necessarily undermine the consensus view that the economy has begun to grow and is likely to keep expanding during the second half of the year.
"To the extent that this revision has any importance, it is that most of it was a decline in inventories," said economist Bruce Steinberg of Merill Lynch Capital Markets in New York. "The degree of inventory liquidation during the first half of the year was so strong that it bodes well for growth later on -- including the current quarter. We had recession through the first half, but some kind of recovery is now under way."
According to the revised estimate, the gross national product declined during the second quarter at annual rate of $1.1 billion to a total of $4.123 trillion, down $5.4 billion from the previous estimate.
The biggest single factor in the revision was a $5.3 billion annual reduction in inventory accumulation by manufacturers, wholesalers and retailers, an adjustment that is expected to contribute to economic growth later on.
U.S. business inventories have been shrinking for three consecutive quarters. While the shrinkage causes current GNP to appear smaller, it should provide a firm base for stronger recovery as manufacturers resume higher rates of production. In fact, some economists said that the steady inventory liquidation actually reduces the probability of a "double-dip" recession.
Consumer spending, originally reported to have increased at a 3.6 percent annual clip in the second quarter, was trimmed back to 2.8 percent.