Washington, DC, May 27--Driven by businesses' vigorous restocking of inventories, the U.S. economy surpassed an earlier estimate for first-quarter growth as corporate profits continued to show improvement.
The Commerce Department said gross domestic product increased from January through March at a 4.4% annual rate, better than the 4.2% pace originally projected. Economists surveyed by Dow Jones Newswires had forecast revised growth of 4.5%.
Sharply higher inventory rebuilding was a primary reason for the modest upward revision, the government said. Businesses increased inventories by $28.2 billion, revised way up from an originally estimated $15.3 billion boost. That added near three-quarters of a percentage point to the overall growth rate.
"The upward revision to the percentage change in real GDP primarily reflected upward revisions to private inventory investment, to state and local government spending, and to exports that were partly offset by an upward revision to imports and a downward revision to equipment and software," the report said.
Corporate after-tax earnings increased 1.4% from the previous three months, an initial estimate showed. Though that figure was markedly lower than fourth-quarter profit growth of 7.6%, first-quarter profits were up 36.7% from the same period a year ago.
GDP is a measure of all the goods and services produced in the U.S. It grew at a 4.1% annual rate in the final quarter of 2003 and a 3.1% rate for the full year. It advanced 2.2% in 2002 and 0.5% in 2001.
Economists expect stronger growth in 2004. A recent survey of the National Association of Business Economics projected 4.7% growth for the year, up slightly from an earlier forecast 4.6%. Survey participants expect growth in 2005 of 3.8%.
Spending by consumers, which accounts for about two-thirds of U.S. economic activity, rose at a 3.9% annual rate in the first quarter. The government originally reported first-quarter outlays increased 3.8%. Fourth-quarter spending rose 3.2%.
Consumers' spending on durable goods, meant to last at least three years such as cars, fell 4.2%, revised up from a previously reported 4.7% decline. Spending on non-durables increased by 6.6%, revised up from a previously estimated 6.4% increase.
Business spending advanced by 5.8%. Outlays were revised up from a previously estimated 7.2% increase. Equipment and software spending climbed 9.8%. Non-residential structures went down 7.0%. Overall business spending rose 10.9% in the fourth quarter.
Real final sales of domestic product -- that is, GDP less the change in private inventories -- rose at a 3.7% annual rate. That figure was revised down from the originally reported 3.9% advance. Fourth-quarter real final sales climbed at a 3.4% annual rate.
Exports increased 4.9% in the first quarter. Imports advanced by 5.9%. Commerce originally reported exports rose 3.2% and imports went up 2.0% Fourth-quarter exports shot up by 20.5% and imports surged 16.4%.
Federal government spending increased by 9.2%, revised down from an earlier estimated 10.1% advance. Federal outlays rose 0.7% in the fourth quarter.
State and local government spending dropped 0.7% in the first quarter, revised up from a previously reported 2.6% drop.
The price index for gross domestic purchases rose at a 3.3% rate; it was first estimated as climbing 3.2%. The index advanced 1.3% in the fourth quarter. The government's price index for personal consumption went up at a 3.0% rate during the first quarter; the original estimate had the gauge rising 3.2%. The PCE index climbed 1.0% in the fourth quarter.
