It’s official: the economic contraction slowed dramatically in the second quarter. By that standard, the government can claim a victory. But now comes the hard part, and progress won’t come easily or quickly.
For the moment, however, there’s reason to cheer. The annual real change in GDP in this year’s second quarter was a relatively mild fall of 1.0%, the Bureau of Economic Analysis reports today. That’s a massively improved number from the first quarter’s huge 6.4% tumble.
The sharp slowdown in the rate of contraction isn’t necessarily surprising. As we’ve been discussing for months, a number of economic clues have been suggesting that the recession may be coming to a technical end. At the same time, we’ve also been warning that the official end of the recession—as defined by NBER—isn’t likely to lead to a rebound of any strength any time soon. Instead, we’re looking at an extended period of flat to perhaps modestly negative GDP reports between the technical end of the recession and the start of the recovery. In that sense, the business cycle is different this time, and the risk of a double-dip recession is therefore higher than normal as well.