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The federal government Wednesday reported a 6.1 per cent contraction in the U.S. economy during this year's first quarter-a grim headline in the making. But economists and IT industry analysts saw some hopeful signs in the latest numbers, as did Wall Street, where stock prices staged a midday rally [on Wednesday].

The U.S. Department of Commerce, in its quarterly report on gross domestic product (GDP), said that consumer spending increased by 2.2 per cent in Q1 on a sequential basis, after falling 4.3 per cent in last year's fourth quarter. Consumers account for about two-thirds of overall spending in the U.S., so the first-quarter jump was seen as a good omen for the economy as a whole.

"If consumer spending is starting to recover, that means you've got signs that the economy is starting to recover," said Andrew Bartels, an analyst at Forrester Research Inc.

Bartels and other analysts said shrinking business inventories that also were cited in the Commerce Department report may spur increased production to meet the growing consumer demand. Moreover, the federal government's economic stimulus spending under the $787 billion bill signed by President Barack Obama in February has yet to fully kick in.

The first-quarter decline in inventories "is a classic sign of reaching a bottom, because now the shelves are empty," said Frank Scavo, president of Computer Economics Inc., a market research firm in Irvine, Calif.

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