(RTTNews) - Economic activity in the U.S. contracted slightly less than initially estimated in the second quarter, according to a report released by the Commerce Department, although the report still showed a sharp drop in gross domestic product.
The report said real gross domestic product plummeted by 31.7 percent in the second quarter compared to the previously reported 32.9 percent nosedive. Economists had expected the plunge in GDP to be revised to 32.5 percent.
Despite the revision, the steep drop in GDP in the second quarter still represented the biggest economic contraction on record.
The Commerce Department said the smaller than previously estimated drop in GDP came as private inventory investment and consumer spending decreased less than previously estimated.
However, Lydia Boussour, Senior U.S. Economist at Oxford Economics, said the modest revision "adds little to a story that has already been written."
"While the economy has since made some headway towards recovery, the figure is an important testament to the sharp economic pain inflicted by the coronavirus pandemic and should motivate policymakers to get their act together to preserve the nascent recovery," Boussour said.
The report said the nosedive in GD in the second quarter, which followed a 5.0 percent slump in the first quarter, reflected decreases in consumer spending, exports, non-residential fixed investment, private inventory investment, residential fixed investment, and state and local government spending.
The negative contributions were partly offset by a spike in federal government spending and a decrease in imports, which are a subtraction in the calculation of GDP.
"The fastest recession in U.S. history has been followed by an unprecedented growth spurt," Boussour said. "But the nascent economic recovery is showing signs of fizzling out."
She added, "With a health solution still out of reach and the economic rebound looking fragile, fiscal stimulus is urgently needed to prevent the economy from sliding back into a downturn."
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