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WASHINGTON (AP) -- The U.S. economy sank at a pace of just 1 percent in the second quarter of the year, a new government report shows. It was a better-than-expected showing that provided the strongest signal yet that the longest recession since World War II is finally winding down.
Many economists were predicting a slightly bigger 1.5 percent annualized contraction in second-quarter GDP. It's the total value of all goods and services -- such as cars and clothes and makeup and machinery -- produced within the United States and is the best barometer of the country's economic health.
"The recession looks to have largely bottomed in the spring," said Joel Naroff, president of Naroff Economic Advisors. "Businesses have made most of the adjustments they needed to make, and that will set up the economy to resume growing in the summer," he predicted.
Federal Reserve Chairman Ben Bernanke has said he thinks the recession will end later this year. And many analysts think the economy will start to grow again -- perhaps at around a 1.5 percent pace -- in the July-to-September quarter. That would be anemic growth by historical measures, but it would signal that the downturn has ended.
Naroff said he now thinks growth in the third quarter could turn out to be much stronger because companies will need to replenish bare-bone stockpiles of goods.
"You could get a huge swing in inventories that could create a much bigger growth rate than anybody expects," he said.
If that were to happen, it's possible the economy's growth could clock in around 4 percent in the current quarter, he said.
Obama's stimulus package of tax cuts and increased government spending provided some support to second-quarter economic activity. But it will have more impact through the second half of this year and will carry a bigger punch in 2010, economists said.