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U.S. economy slowed less than expected in first quarter

Staff Writer |
The U.S. economy slowed less than initially thought in the first quarter, but softening business investment and moderate consumer spending are clouding expectations of a sharp acceleration in the second quarter.

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Gross domestic product increased at a 1.2 percent annual rate instead of the 0.7 percent pace reported last month, the Commerce Department said on Friday in its second GDP estimate for the first three months of the year.

That was the worst performance in a year and followed a 2.1 percent growth rate in the fourth quarter.

The government raised its initial estimate of consumer spending growth for the first quarter, but said inventory investment was far smaller than previously reported. The trade deficit also was a bit smaller than estimated last month.

n a second report on Friday, the Commerce Department said non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged in April for a second straight month.

Shipments of these so-called core capital goods dipped 0.1 percent after rising 0.2 percent in March. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

Second-quarter GDP growth estimates range between a rate of 2.0 percent and 3.7 percent rate.

The GDP report also showed an acceleration in business spending equipment was not as fast as previously estimated. Spending on equipment rose at a 7.2 percent rate in the first quarter rather than the 9.1 percent reported last month.

Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose at a 0.6 percent rate instead of the previously reported 0.3 percent pace.

That was still the slowest pace since the fourth quarter of 2009 and followed the fourth quarter's robust 3.5 percent growth rate.