Economy sinks at a 5.7% clip

WASHINGTON — The economy sank at a 5.7 percent pace in the first quarter as the brute force of the recession carried over into this year. However, many analysts believe activity isn't shrinking nearly as much now as the downturn flashes signs of letting up.

The Commerce Department's updated reading on gross domestic product, released Friday, showed the economy's contraction from January to March was slightly less deep than the 6.1 percent annualized decline first estimated last month.

It was a grim first-quarter performance despite the small upgrade. It marked the second-straight quarter where the economy took a huge tumble. At the end of last year, the economy shrank at a staggering 6.3 percent pace, the most in a quarter-century.

Economists are hopeful the economy isn't shrinking nearly as much in the April-to-June quarter as the recession eases its grip. Forecasters at the National Association for Business Economics, or NABE, predict the economy will contract at a 1.8 percent pace.

Other analysts think the economic decline could be steeper — around a 3 percent pace.

"Things are getting less awful," said Bill Cheney, chief economist at John Hancock Financial Services.

Less dramatic cuts by businesses factor into the expected improvement. Consumers, however, likely are to be cautious. There's been encouraging signs recently with gains in orders for big-ticket manufactured goods, some firming in home sales and a slowing in the pace of layoffs.

"The speed of the drop will slow," predicted Ian Shepherdson, chief U.S. economist at High Frequency Economics.

The economy's dismal performance over the past two quarters underscored the toll the recession, which started in December 2007 and now is the longest since World War II, has had on the country. Businesses have ratcheted back spending and slashed 5.7 million jobs to survive the fallout. Financial firms have taken huge losses on soured mortgage investments. Banks and other companies have been forced out of business. Home foreclosures have soared.

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