WASHINGTON — The U.S. economy shrank at the end of last year, revised figures show, and although it resumed growing in the first half of this year -- mustering a 1.9% annual rate from April through June -- the expansion was weaker than most economists had expected.
Treasury Secretary Henry M. Paulson Jr. said Thursday that the first-half growth should be enough to keep the economy expanding for the rest of the year.
But most private forecasters disagreed, saying the comeback would probably prove to be the temporary result of distributing about $100 billion in tax rebates.
"The basic pattern is clear; this is becoming a W-shaped recession," said David Wyss, chief economist for Standard & Poor's in New York.
"The [economy's] decline got interrupted by the rebate checks, but it will go back to declining after people finish spending their checks," he said.
Separately, the Labor Department said Thursday that 448,000 Americans filed initial claims for unemployment compensation last week, the largest number in more than five years.
And the Bureau of Labor Statistics said that wages and salaries of American workers, adjusted for inflation, fell 1.7% in June from a year earlier, the fourth decline in the last five years.
The latest figures for the gross domestic product -- the broadest gauge of the nation's output of goods and services -- helped drive down stock prices as investors concluded that the economy was in worse shape than they had thought.
The Dow Jones industrial average closed down 205.67 points, or 1.8%, at 11,378.02.
The economy expanded at a 1.9% annual rate in the second quarter, up from 0.9% in the first quarter and a 0.2% rate of contraction during the final three months of 2007. Previously, the department reported a 0.6% growth rate for the period.
Although marking an improvement from the preceding quarters, the growth rate for the latest three months was considerably weaker than the 2.3% pace economists had predicted.
Consumer spending, which accounts for about 70% of GDP, rose at a 1.5% rate, less than expected, during the second quarter.
Analysts forecast that consumer spending would surge as Americans received their rebate checks and retailers sought to attract the money with price discounts.
And most economists don't think even the 1.5% rate can be sustained, especially if food and fuel prices continue rising and home prices keep falling.
