1Q GDP Grows at a 0.6% Rate

Washington, DC, May 31, 2007--The economy in the first quarter grew at a 0.6 percent annual rate, according to the Commerce Department. It was the weakest showing in more than four years.

The results compares with the original estimate last month, which called for growth at 1.3 percent pace.

Economists forecast a 0.8 percent gain in GDP during the quarter.

The first quarter may prove to be the low point for the economy as recent reports showed business spending improved and leaner inventories prompted factories to boost production, economists said. Such an outcome would bear out forecasts by Federal Reserve policy makers, who this month reiterated that growth will pickup for the rest of this year and into next.

The Fed's preferred inflation measure, which is tied to consumer spending and strips out food and energy costs, rose at a 2.2 percent annual rate, the same as previously estimated.

The revision in the report reflect a larger trade deficit and fewer inventories than the government estimated last month. The trade deficit widened to an annual pace of $611.8 billion, subtracting 1 percentage point from GDP, twice as much as previously estimated.

Companies reduced inventories at a $4.5 billion rate last quarter compared with initial estimates of a $14.8 billion gain at an annual rate. The figures subtracted another percentage point from growth.

A jump in consumer spending last quarter was one of the few things that kept the expansion alive. The increase in spending, which accounts for about 70 percent of the economy, was revised up to an annual rate of 4.4 percent, the biggest gain in a year, from an initial estimate of 3.8 percent.

Today's report is the second of three estimates released by the government for the quarter. The figures will be revised again next month.