U.S. Economic Growth Slows To 0.6%

May 31, 2007
Slowest pace in four years

In a revision for the January-March period, the U.S. economy slowed to a 0.6% growth pace in the first quarter of 2007, the government said May 31. Gross domestic product (GDP) was revised down from last month's estimate of 1.3% and was the slowest pace in more than four years, the Commerce Department report showed.

The figure was below the 0.8% growth pace estimate by Wall Street analysts and came after a 2.5% expansion in the fourth quarter of 2006.

"The cloud on first-quarter growth is the silver lining for the second quarter," said Drew Matus, senior economist at Lehman Brothers. Matus said consumer spending was better than expected and that inventories had been brought to a low point, requiring factories to ramp up production.

The Commerce Department said the latest revision came as a result of a bigger-than-expected trade deficit. Real estate remained the main drag on economic growth, but the decline was a bit less than earlier estimated. Spending on residential investment fell 15.4%, instead of an earlier estimate of 17%.

Consumer spending was the main driver of growth, increasing 4.4%, up from the earlier estimate of 3.8%. And business investment was better than earlier estimates, growing 2.9%, revised up from 2%.

An inflation indicator linked to GDP showed a 3.3% gain in prices, down from an earlier estimate of 3.4%. Core prices, excluding food and energy, were up an unrevised 2.2%.

Copyright Agence France-Presse, 2007

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