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U.S. first-quarter GDP revised up slightly
The U.S. economy performed slightly better than expected in the first quarter, with stronger growth in consumption and exports providing the main support, revised official data showed. Further proof that the U.S. economy has finally avoided a recession, but the trend of the U.S. economy in the coming months is still under a cloud. Gross domestic product rose at an annualized rate of 1% in the first quarter, the Commerce Department said in its third and final revision on Thursday, up from a preliminary reading of a 0.9% increase and better than the previous reading. 0.6% in the fourth quarter of the year. The effects of upward revisions to export and consumer spending and business fixed investment were partially offset by upward revisions to imports and downward revisions to inventory investment, the Commerce Department said. First-quarter growth in consumer spending, which accounts for about 70 percent of GDP, was revised up slightly to 1.1 percent, with healthy increases in spending on services offsetting declines in spending on durable and nondurable goods. While the increase is small by historical standards, the increase in consumer spending is still sufficient to generate GDP growth given the sheer size of consumption relative to the economy as a whole. Additional support was provided by exports, which were largely helped by a weaker dollar. Exports increased at an annual rate of 5.4%, contributing 0.66 percentage points to GDP growth. Economists said the revision to the GDP data supported the idea that the U.S. economy could avoid a recession in the first half of the year. Strong consumer spending in May (thanks to the arrival of tax refund checks) and continued strength in exports will likely boost GDP by 1.5% to 2% in the second quarter. But some economists worry that once the temporary boost from the tax rebates wears off, a combination of high food and oil prices and a sluggish job market could put pressure on household spending and a sustained rebound in the economy. resistance. Measures of personal consumption expenditures, chain-weighted prices and domestic purchases, which measure inflation, were all revised up slightly, according to Thursday's GDP report. The personal consumption expenditures price index, which excludes food and energy, rose 2.3% from a year earlier, above the 1.5%-2% level the Fed considers appropriate. The data may make officials nervous about the impact of high energy and commodity prices, which could affect inflation and inflation expectations. However, officials said on Wednesday they expected inflation to moderate later this year and into 2009. Corporate profits after tax fell 7.8% in the first quarter, a steeper decline than preliminary figures. Corporate after-tax profits fell 3.6% in the quarter from a year earlier. Residential fixed investment fell 24.6%. The drop in investment in this area reduced GDP growth by more than 1.1 percentage points. Business spending edged up an upwardly revised 0.6 percent, while construction investment rose 1.2 percent. Equipment and software spending rose 0.2%. Inventories fell by $19.6 billion in the first quarter, a slightly larger decline than the preliminary data. The revision could bode well for U.S. GDP in the second quarter, as the situation means businesses are not piling up inventories. Overstocking will lead to production cuts. Real final sales of domestic products, or GDP less changes in private-sector inventories, rose 0.9%, a slight upward revision from the preliminary reading. Federal government spending was up 4.3% after a small downward revision, and state and local government spending was up 0.8% after a small upward revision.