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Published: Sat, May 27, 2017
Economy | By Melissa Porter

US economy's first quarter not as weak as first thought

US economy's first quarter not as weak as first thought

May 26 US economic growth slowed less sharply in the first quarter than initially thought, but the weakness was likely an aberration amid a strong labor market that is near full employment.

Growth in the gross domestic product, the broadest measure of economic health, is down from a 2.1 percent annual growth rate in the fourth quarter and marks the weakest result in a year, the Commerce Department reported Friday.

Stronger spending from businesses and consumers was behind the revision. The government revised up its January-March growth reading to a rate of 1.2 percent - better than an earlier estimate of 0.7 percent but well below President Donald Trump's ambitious growth targets.

That was the weakest performance since the first quarter of 2016 and followed a 2.1 percent rate of expansion in the fourth quarter.

Since 1950, annual GDP has risen an average of 3.1 percent.

Many experts have dismissed the notion that the economy can achieve a consistent annual growth rate of at least 3 per cent at a time of sluggish worker productivity, an aging workforce and slower spending by consumers - on top of Trump's proposed spending cuts to education, research and social programs.

"Economic indicators so far aren't entirely convincing on a second-quarter bounce in activity and show a USA economy struggling to surprise on the upside", said Scott Anderson, chief economist at Bank of the West in San Francisco.

That is almost twice as fast as the preliminary estimate, but slower than the end of previous year, and much more slowly than the 3 percent rate of expansion that the Trump administration says it will achieve.

Second-quarter GDP growth estimates range between a rate of 2.0 percent and 3.7 percent rate. But Ashworth and other analysts said they still envision more robust expansion in the current quarter.

The electronics sector was a bright spot, with sales of communications equipment rising 4.2 percent, the strongest rate in a year.

With consumer sentiment hovering at lofty levels, consumer spending could pick up.

That drag from low spending on energy is one of the reasons that economists view the first-quarter slowdown as transitory. Inventory investment increased at a $49.6 billion rate in the October-December period. GDP for the first three months of the year tends to underperform because of difficulties with the calculation of data.

"The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month", the bureau said.

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