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 Gross domestic product rose at a 0.8 percent annual rate as opposed
to the 0.5 percent pace reported last month, the Commerce Department
said in its second GDP estimate on Friday.
It was the weakest growth since the first quarter of 2015.
The upward revision to first-quarter GDP growth also reflected a
smaller drag from trade than previously reported. The government
also reported a rebound in after-tax corporate profits, which
increased at a 0.6 percent rate in the first quarter after plunging
at an 8.4 percent pace in the fourth quarter.
When measured from the income side, the economy grew at a 2.2
percent rate after expanding at a 1.9 percent pace in the fourth
quarter.
The economy has been hurt by a strong dollar and sluggish global
demand, which have eroded export growth. It has also been squeezed
by lower oil prices, which have undercut profits of oilfield
companies like Schlumberger <SLB.N> and Halliburton <HAL.N>, forcing
them to slash spending on equipment.
Economists also believe the model used by the government to strip
out seasonal patterns from data is not fully accomplishing its goal
despite steps last year to address the problem.
Residual seasonality has plagued first-quarter GDP data, with growth
underperforming in five of the last six years since the economic
recovery started in the middle of 2009.
There are signs the economy regained momentum early in the second
quarter, with retail sales, goods exports, industrial production,
housing starts and home sales surging in April.
The Atlanta Federal Reserve is currently estimating second-quarter
GDP rising at a 2.9 percent rate. But the continuing high level of
inventories poses a downside risk to this forecast.
Economists polled by Reuters had expected first-quarter GDP growth
would be revised up to a 0.9 percent rate. The economy grew at a 1.4
percent rate in the fourth quarter.
INVENTORY ACCUMULATION
Spending on residential construction increased at a 17.1 percent
rate in the first quarter, the fastest pace since the fourth quarter
of 2012. It was previously reported to have increased at a rate of
14.8 percent.
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Businesses accumulated $69.6 billion worth of inventory, instead of
the $60.9 billion estimated last month. Inventories cut two-tenths
of a percentage point from first-quarter GDP growth instead of the
previously reported 0.33 percentage point.
There was no revision to consumer spending, which accounts for more than
two-thirds of U.S. economic activity. Spending increased at a pace of 1.9
percent, a slowdown from the fourth quarter's 2.4 percent rate.
Households were frugal in the first quarter, cutting back on purchases of
long-lasting manufactured goods like automobiles.
Income at the disposal of households after accounting for taxes and inflation
was revised up to show it surging at a 4.0 percent rate in the first quarter
instead of the previously reported 2.9 percent. Savings were revised up to
$782.6 billion from $712.3 billion.
Exports were not as weak as initially thought. That, together with a decline in
imports, produced a smaller trade deficit, which subtracted 0.21 percentage
point from first-quarter GDP instead of the 0.34 percentage point reported last
month.
(Reporting by Lucia Mutikani; Editing by Paul Simao)
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