U.S. Economy Grows 1%

The U.S. economy grew more strongly than previously estimated in the first quarter, the government said on June 26.

The Commerce Department revised its estimate for gross domestic product (GDP) growth in the first three months of the year to an annual 1%, up from last month's reading of 0.9%. The initial estimate two months ago was a 0.6% pace that matched the expansion in the 2007 fourth quarter.

The final revision, which signals a modest gain in momentum in the face of headwinds from housing and credit crises, was in line with analyst expectations. Still, expansion remains subpar for the world's top economic powerhouse. "The data provides evidence that the U.S. economy grew at a slightly faster pace than previously thought, indicating that the country may have avoided a recession," said Andrea Kramer at Schaeffer's Investment Research.

The final revision reflected increases in consumer spending for services, higher exports of goods and services lifted by a weak dollar, and federal government spending.

The 0.1 percentage point increase represented a gain of $1.7 billion in the economy, the Commerce Department said.

The major drag on GDP was housing -- residential fixed investment fell 24.6% -- and consumer spending for durable goods, big-ticket items like cars, computers and refrigerators.

Consumer spending eclipsed trade as the strongest contributor to growth, adding 0.81 percentage points. The change was attributed to stronger spending, which was revised upward to 1.1% from 1%. That reading, however, marked a sharp slowdown from the fourth quarter, when consumer spending, which accounts for two-thirds of economic activity, increased 2.3%.

Trade remained a main driver of economic activity, adding 0.79 percentage points to GDP. Exports jumped 5.4%, nearly double than the prior estimate of 2.8%, while imports were weaker than thought, down 0.7% instead of a rise of 2.6%.

Inflation was revised slightly higher amid soaring oil and food prices. The GDP price index rose 3.6%, 0.1 percentage point more than the preliminary estimate but down from a 3.7% pace in the 2007 fourth quarter.

The core index, excluding food and energy prices, increased 2.3%, the same rate as in the fourth quarter.

Businesses fared better than thought, with investment in computer equipment and software up 0.2% instead of the 0.9% decline previously reported.