Economy: The pain is starting to ease

NEW YORK (CNNMoney.com) -- The pace of economic decline slowed substantially in the second quarter, as the U.S. economy shrank at an annual rate of 1% -- far less than it did in the first quarter, according to a government report released Friday.

Economists surveyed on Briefing.com expected the second-quarter reading to show the economy contracted at an annual rate of 1.5%.

The economy has been mired in recession since December 2007, worsening in recent quarters. The fourth quarter of 2008 and first quarter of 2009 measured the worst two quarterly declines in 26 years -- the nation's gross domestic product fell a revised 5.4% and 6.4% respectively.

The slower second-quarter contraction was largely due to a smaller decline in exports as consumer prices and government spending rocketed higher.

That partially offset a 1.2% decline in consumer spending in the second quarter, which makes up about 70% of GDP. The decline in business inventories also took a significantly smaller bite out of GDP last quarter than in the previous two quarters.

GDP, the broadest measure of economic activity, has contracted for four straight quarters -- the first time that has happened since the Commerce Department began tracking that measure in 1947. But the most recent quarterly decline is the smallest since the third quarter of 2008, giving hope to some economists that the recession is at or nearing an end.

Farewell recession? Lakshman Achuthan, managing director of the Economic Cycle Research Institute, expects the recession to come to an end this summer. He noted that GDP is a trailing indicator, but the change in direction suggests the worst is behind us.

"As we suspected, things got a lot less bad in terms of economic activity," he said. "But the rapid recovery of activity suggests that we won't have a double-dip recession or an L-shaped recovery."

"It's probably a small 'V'," he added.

The National Bureau of Economic Analysis, which declares the beginning and end of recessions, takes into consideration more factors than just GDP, including job growth. It also doesn't typically doesn't officially call the start or end until several months later.