[06/28/16] Economic growth in the United States slowed in the first quarter but not as sharply as previously estimated, with gains in exports and software investment partly offsetting weak consumer spending.
Gross domestic product increased at a 1.1 percent annual rate, rather than the 0.8 percent pace reported last month, the Commerce Department said on Tuesday, in its final estimate.
First-quarter G.D.P. growth has been revised higher by 0.6 percentage point since the first estimate was published in April. The economy grew at a rate of 1.4 percent in the fourth quarter. The first-quarter revision was broadly in line with economists’ expectations.
There are signs the economy has regained momentum in the second quarter, with retail sales and home sales rising in April and May, even though business spending continues to struggle and job growth has slowed.
But uncertainty stoked by Britain’s surprising vote to leave the European Union poses a risk to growth for the rest of year.
The Federal Reserve chairwoman, Janet Yellen, told lawmakers last week that data pointed to “a noticeable step-up” in G.D.P. growth in the second quarter. The Federal Reserve Bank of Atlanta is estimating that second-quarter G.D.P. will rise at a 2.6 percent rate.
Economic growth in the first quarter was constrained by a strong dollar and sluggish global demand. Output was also hampered by businesses’ efforts to reduce an inventory overhang, with a further drag coming from lower oil prices, which have set off deep spending cuts on capital goods like equipment.
Economists also say they think the model used by the government to strip out seasonal patterns from data is not fully accomplishing its goal. The economy has underperformed in the first quarter in five of the last six years.
First-quarter business spending on software, research and development was revised to show it rising at a 4.4 percent rate instead of falling at a 0.1 percent rate. Business spending on equipment fell at an 8.7 percent pace as opposed to the 9 percent rate reported last month.
Over all, business spending sliced off 0.58 percentage point from first-quarter G.D.P. instead of the previously reported 0.81 percentage point.
Export growth was revised to show a 0.3 percent rate of increase instead of the previously reported 2 percent pace of contraction. With imports weak, that resulted in a smaller trade deficit.
Growth in consumer spending, which accounts for more than two-thirds of economic activity in the United States, was revised down to a 1.5 percent rate, the slowest pace in two years. Consumer spending was previously reported to have increased at a 1.9 percent rate.
The downward revision reflected weak spending on services like transportation and recreation. But April and May retail sales reports suggest that consumer spending has rebounded.
Also on Tuesday, a report from the Conference Board showed that consumer confidence increased to an eight-month high in June. The survey was, however, conducted before last week’s referendum in Britain.
“Near-term market volatility may give households reason for pause, but consumer spending should remain a key support for the economy in the coming quarters,” said Jim Baird, chief investment officer at Plante Moran Financial Advisors in Kalamazoo, Mich.
Separately, data released on Tuesday showed that house prices rose 5.4 percent in April from a year ago.
Publisher: New York Times / Reuters
Link: http://www.nytimes.com/2016/06/29/business/economy/first-quarter-growth-revised-upward-but-still-shows-slowdown.html?ref=economy&_r=0
