Economic Contraction Slows

The American economy’s long decline leveled off significantly from April through June, the government reported on Friday, crystallizing expectations of a turnaround in the second half of the year.

The nation’s output shrank at an annual pace of 1 percent in the second quarter, after contracting at a rate of 6.4 percent earlier this year. Government spending, helped by the first payments from the administration’s $787 billion stimulus package, propped up activity in the latest quarter and accounted for 20 percent of the country’s output.

But consumer spending, which makes up about 70 percent of overall economic activity, has continued to fall as fearful Americans save more. Many economists express concern about what will happen once government spending lets up if consumers remain worried about losing their jobs and their weakened household finances.