Fed Sees Slower Contraction

The pace of economic contraction slowed somewhat since March, the Federal Open Market Committee (FOMC) said after wrapping up a two-day meeting Wednesday. But the contraction continues, indicating the economy remains entrenched in the throes of recession. US real gross domestic product (GDP) slid at an annual rate of 6.1% in Q109, slowing from its 6.3% fourth-quarter decline, but still exceeding economists’ expectations by more than one full percentage point, the US Commerce Department said Wednesday in its advance estimates. While the contraction of the US economy slowed in recent months, constriction is still in motion — a fact not lost on the FOMC. Although the committee’s outlook improved modestly since March, actual economic activity is likely to remain weak, the FOMC said. The committee’s statement indicated no intentions to pull back on aggressive efforts to pour liquidity into financial markets, but the FOMC insisted inflation will remain subdued. Household spending shows hints of stabilization but remains weak as businesses cut back on expenditures, cut wages and slash jobs, putting financial pressure on consumers, according to the FOMC’s statement. Real consumer spending slipped 0.2% in March after inching up the previous two months, the Commerce Department said today. At the same time, wages and salaries fell 0.5% in the month, suggesting US workers and employees tightened spending habits as income levels slide. Write to Diana Golobay at diana.golobay@housingwire.com.