US economy shrank 1%

WASHINGTON - THE US economy shrank at a 1.0 per cent annual pace in the second quarter, the government said on Thursday, leaving unrevised an estimate from a month earlier.

The figure for gross domestic product was better than expected by analysts, who had forecast a revision showing a 1.5 per cent pace of decline for the recession-bound economy.

The Commerce Department figures showed an easing of the deep recession that led to a 6.4 per cent pace of decline in the first quarter.

The revision showed a drop of 1.0 per cent in consumer spending, the main driver of economic activity, instead of the prior estimate of a 1.2 per cent decline.

Motor vehicle output added 0.20 percentage points to the GDP after subtracting 1.69 percentage points from the first-quarter change.

Federal government spending increased 11.0 per cent in the second quarter, in contrast to a decrease of 4.3 per cent in the first.

The housing sector remained a drag on the economy, with real residential fixed investment falling 22.8 per cent, compared with a decrease of 38.2 per cent in the prior quarter.

Exports fell 5.0 per cent while imports decreased 15.1 per cent - a phenomenon that contributes to GDP because it means more production is domestic based. -- AFP