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Us Slump Is Almost Over, Imf Predicts

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The Fund, publishing its annual report on the US economy on the same day official figures showed that the American recession was far deeper than first thought, believes that the sharp contraction "seems to be ending" but that recovery will be slow.

Its timing coincided with the release by the US Commerce Department of much-awaited second-quarter gross domestic product (GDP) figures, showing a marked decrease in the rate of economic slowdown, with the US economy contracting at an annualised 1pc rate in the three months to June.

President Barack Obama said he was "guardedly optimistic about the direction that our economy is going in", adding that the "economy has done measurably better that we had thought".

The second-quarter GDP figure was better than economists' estimates of a 1.5pc contraction, and was a result of increased consumer spending and President Obama's $787bn (£475bn) fiscal stimulus package.

However, it was not all good news, with the first quarter's 5.5pc contraction rate revised downwards to 6.4pc, the biggest quarterly decline since early 1982, reflecting just how deep the economic depression was at one stage.

In addition, the Commerce Department figures contained some stark revisions to earlier quarters, with the growth rate for 2008 revised down from 1.1pc to 0.4pc, and the drop in real GDP from the fourth quarter of 2007 to the same quarter in 2008 revised down from minus 0.8pc to minus 0.9pc.

As a result, US GDP has now fallen for four consecutive quarters, the first time that has happened since 1947, when records began.

However, in spite of the negative historic data, the majority of economists appeared to concentrate on the positives.

Chris Rupkey, Bank of Tokyo's chief financial economist in New York, said: "The recession is entering its final hours. Those green shoots are starting to grow again, and the economy is finally moving down the road to recovery."

The positive sentiment helped push major US markets higher, with the Dow Jones up 45.42 points at 9199.88, on track for its best July performance in 20 years.

The IMF, whose report was completed before the GDP numbers were issued, stuck to its earlier forecast that the US economy will shrink by 2.6pc this year, and grow by 0.8pc next year.

"As a result of their increasingly strong and comprehensive policy measures, the sharp fall in economic output seems to be ending, and confidence in financial stability has strengthened," the IMF said in its report.

As a result of subsidising the market we can now have a recovery? :blink:

Does this IMF report actually mention debt anywhere? Or the problems of servicing such huge debt, is there talk of how the US will reduce it's debt levels.

However as debt is wealth I'm sure this is unimportant.

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