Page last updated at 23:22 GMT, Friday, 31 July 2009 00:22 UK

Obama sees US economy improving

US GDP growth

US President Barack Obama has said that new figures on the American economy indicate progress is being made in tackling the country's problems.

The economy shrank at an annual pace of 1% in the April-to-June quarter, government figures have shown.

The data was better than expected, but marked the longest period of decline since records began in 1947.

Analysts said the data suggested the worst could be over for the economy - now in recession for a year.

Mr Obama said the figures showed that the economy was "heading in the right direction".

However, the figures for the January-to-March quarter were revised down to -6.4%. The previous estimate was -5.5%.

The revision "revealed that the recession we faced when I took office was even deeper than anyone thought at the time", said Mr Obama.

But "in the last few months, the economy has done measurably better than we had thought, better than expected", he added.

He did, however, say that there would be no recovery as long as unemployment kept rising.

The figures are worked out on an annualised basis, which reflects the change if continued at the current pace over a year.

'Worst behind us'

The figures show that the pace of contraction is slowing rapidly in the US, even more than in the UK.

ANALYSIS
Steve Schifferes, economics reporter, BBC News

The figures show that the pace of contraction is slowing rapidly in the US, even more than in the UK.

That reflects the effect of the stimulus package which has boosted government spending.

However, it still could be a number of quarters before output recovers to the level before the downturn started.

The severity of that downturn was emphasised by the downward revision of the first quarter's growth, making it one of the biggest quarterly economic drops in US history.

"We're seeing signs of stabilisation in a lot of areas of the economy, so the worst is definitely behind us," said Scott Brown, chief economist at Raymond James & Associates.

Others were even more upbeat.

"The recession is entering its final hours. Today's report shows those green shoots are starting to grow again, and the economy is finally moving down the road to recovery," said Chris Rupkey, chief financial economist at Bank of Tokyo/Mitsubishi UFJ.

The improved economic performance in the second quarter was largely due to government spending.

However, there were still falls in investment and personal consumption.

Following the figures, White House spokesperson Robert Gibbs said: "Progress is being made but much work remains."

He said unemployment figures due out next week were likely to show that hundreds of thousands more jobs had been lost.

The data prompted the Dow Jones index to jump when trading opened, but it fell back to end the day up 17 points, or 0.2%, at 9171.61.

"The figures...may well set the tone for the next few weeks on the equity markets," said David Jones, chief market strategist at IG Index.



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