Washington, DC, June 26--The economy grew more slowly than previously estimated during the first three months of the year as business spending slowed and inventories dwindled.
Gross domestic product, a measure of all the goods and services produced in the U.S., rose at a revised 1.4% annual rate in the first quarter, exactly what it was in the same period a year earlier, the Commerce Department said Thursday. First-quarter growth had previously been estimated at a 1.9% annual rate.
Meanwhile, the number of workers filing first-time applications for unemployment benefits dropped by a larger-than-expected 22,000 last week to 404,000, a three-month low, the Labor Department reported. The four-week average, which smooths out weekly fluctuations, declined to 428,250.
Economists had predicted first-quarter economic growth would be unrevised and that initial jobless claims would decline by 3,000, according to surveys by Dow Jones and CNBC.
The GDP report showed that tepid economic growth took a toll on profits, but not as big a toll as first expected. After-tax profits rose at a revised 3.8% annual rate during the first quarter, after rising at a 4.1% clip during the fourth quarter. But the first-quarter gauge came in better than the 2.5% previously expected.
Consumer spending, as measured by personal consumption expenditures, rose at 2% annual rate, after rising 1.7% in the previous quarter. Spending on durable goods, manufactured items such as cars and appliances meant to last three years or longer, fell 2% after an 8% drop in the fourth quarter. Spending on nondurable goods rose by 6.1%.
Business spending skidded 4.4% after climbing 2.3% in the previous quarter, which had been the first gain in that category in two years. Spending on computers and equipment fell after previously rising for three straight quarters. Spending on structures also declined.
The pullback in business spending resulted in slower inventory accumulation during the quarter and was the main reason behind the revision to the overall first-quarter growth figures. Businesses accumulated a revised $4.8 billion worth of inventory during the quarter, down from the $13.2 billion level last estimated.
Real final sales, which is GDP less the change in private inventories, rose at a revised 2.3% annual rate in the quarter after rising at a 1.1% annual rate in the fourth quarter. First-quarter real final sales were previously estimated at a 2.4% annual rate.
Net exports fell 1.3%, while imports dropped 6.2% during the quarter. This resulted in almost nearly a percentage point of growth being added to first quarter GDP.
Spending by federal, state and local governments slowed during the quarter, rising 0.4% after a 4.6% rise during the fourth quarter.
