U.S. GDP Growth Revised Up to 1.9%

U.S. economic growth in the first quarter was revised up by a tenth of a point to a 1.9% annual pace, the government said Friday in its final estimate of output.

The Commerce Department's slight upward revision in gross domestic product (GDP) from the prior estimate of 1.8% growth was just above analyst expectations for no change in the figure.

Still, the January-March growth rate confirms a sharp deceleration of the world's largest economy from a 3.1% pace in the fourth quarter of 2010.

The department's third estimate for GDP reflected a downward revision to imports and an upward revision to inventory investment, which were offset by downward revisions to exports, to housing and state and local government spending.

Pace of Expansion 'Fairly Dismal'

The report "does not change the picture of slow economic growth in the first quarter with consumers hampered by a surge in inflation," analysts at RDQ Economics said.

The pace of expansion "is fairly dismal given the depth of the recession that the economy is recovering from," they added.

"One good piece of news was that corporate profit growth was revised higher -- profits are the only thing that has been V-shaped in this recovery but even here we expect a slowing this year on our outlook for flatter profit margins."

Consumer spending remained the key driver of economic activity, rising at a 2.2% pace and contributing 1.52 percentage points to growth in the first quarter.

Business investment and inventory building also contributed to growth, but government and housing spending pulled down the pace of expansion.

Analysts expect some improvement in the second quarter, which began in April, but not enough to make a major change in the unemployment rate, which was 9.1% in May.

"All in all, today's report does not change the picture of a soft quarter for domestic demand, although we continue to judge that this partly reflected temporary factors, such as the slump in defense expenditures and jump in headline inflation," said Peter Newland at Barclays Research.