The U.S. government announced that the U.S. economy grew strongly in the first quarter, though the growth rate was slightly lower than initially expected, with consumer and business spending revised downward.
The U.S. Commerce Department stated on Thursday that the U.S. Gross Domestic Product (GDP) grew at an annualized rate of 3.0% from January to March.
Data also showed that corporate profits are rebounding. After-tax earnings climbed 9.7%, a higher increase than the 8.2% seen in the fourth quarter of last year. Corporate profit levels for the quarter were up 42.7% from the same period last year, as the U.S. economy continues to recover from a deep recession, although the unemployment rate remains high.
In the initial report released a month ago, the government estimated that first-quarter GDP grew by 3.2% compared to the same period last year. The revised growth rate of 3.0% fell short of the 3.4% expected by economists surveyed by Dow Jones Newswires, and was also lower than the 5.6% growth rate in the fourth quarter of last year. However, the significant GDP increase in the fourth quarter of last year was primarily due to technical factors such as changes in inventories, rather than consumer spending. Consumer spending is the foundation of the U.S. economy, accounting for approximately two-thirds of U.S. GDP.
The latest report shows that U.S. consumer spending grew by 3.5% in the first quarter, lower than the initially announced 3.6%, but still more than double the 1.6% growth rate in the fourth quarter of last year, marking the highest growth level since the first quarter of 2007.
With the improvement in the labor market, U.S. consumers have also seen some relief in their finances.
Thursday's data largely left the picture of mild inflationary pressure in the first quarter unchanged.
For example, the personal consumption expenditures price index for the first quarter remained unrevised at an increase of 1.5%, compared to a 2.5% increase in the fourth quarter of last year.
The core personal consumption expenditures price index, which excludes food and energy prices, also remained unrevised, staying at a record low of 0.6%. It was an increase of 1.8% in the fourth quarter of last year.
The U.S. gross domestic purchases price index for the first quarter remained unrevised at an increase of 1.7%, compared to a 2.0% increase in the fourth quarter.
The chain-weighted gross domestic purchases price index for the first quarter was revised upward to an increase of 1.0%, from the preliminary data of 0.9%. The increase in the fourth quarter was 0.5%.
The GDP report released on Thursday showed that business spending for the first quarter was revised downward to a growth of 3.1%, from the preliminary data of 4.1%. Spending on equipment and software grew by only 12.7%, compared to the preliminary data of 13.4%.
Real final sales (GDP minus private inventories) for the first quarter were revised downward to an increase of 1.4% compared to the same period last year, from the preliminary data of 1.6%, compared to an increase of 1.7% in the fourth quarter of last year.
Housing market data was slightly revised, from a decline of 10.9% in the preliminary data to a decline of 10.7%. Residential fixed investment increased by 3.8% in the fourth quarter. It is expected that residential fixed investment should regain momentum in the second quarter, as government tax credit policies boosted home purchases and construction in March and April.
Federal government spending for the first quarter was revised to a growth of 1.2%, from the preliminary data of 1.4%. State and local government spending declined by 3.9%.
U.S. exports grew by 7.2% and imports grew by 10.4% in the first quarter. The preliminary data showed export growth of 5.8% and import growth of 8.9%.