The U.S. economy grew more than previously estimated in the first quarter as Americans shunned imports and exports climbed to a record...
The U.S. economy grew more than previously estimated in the first quarter as Americans shunned imports and exports climbed to a record.
The 0.9 percent gain at an annual pace in gross domestic product compares with an advance estimate of 0.6 percent, the Commerce Department said Thursday. Fourth-quarter growth was 0.6 percent.
“It’s basically like an airplane at stall speed, just skimming above the water,” said Jeffrey Frankel, an economist at Harvard University who is a member of the panel that dates U.S. economic cycles. “I wouldn’t rule out going into a recession” later in the year.
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Trade remains the bright spot for an economy that is likely to slow this quarter as surging fuel and food bills and falling home values force consumers to cut back. The economy will expand just 0.1 percent this quarter as spending slows further, according to economists surveyed by Bloomberg.
“We are somewhere in the twilight zone between an expansion and a recession,” said Michael Feroli, an economist at JPMorgan Chase. “We will have a poor pace of growth through the year.”
Harvard University economist Martin Feldstein, president of the National Bureau of Economic Research — the group that eventually decides when a recession has started — Thursday said the economy probably shrank last quarter.
“Virtually every indicator is heading down,” Feldstein said. Still, there’s “a chance” the U.S. won’t go into a recession.
Second of three estimates
Thursday’s GDP report is the second of three estimates. The median forecast of 74 economists surveyed by Bloomberg News was for a 0.9 percent pace. Projections ranged from gains of 0.6 percent to 1.3 percent.
After a 0.6 percent growth rate in the fourth quarter, the reading was the smallest six-month expansion rate in five years.
The trade deficit shrank to an annual pace of $480.2 billion, the smallest since the third quarter of 2002. Trade’s contribution to growth jumped to 0.8 percentage point, four times more than previously estimated.
Consumer spending, which accounts for more than two-thirds of the economy, rose at a 1 percent annual rate in the first quarter, the same as estimated last month. The gain was the smallest since the 2001 recession.
The revisions also showed bigger gains in incomes than previously estimated, easing concern that spending will collapse.
Personal income increased at a 5.1 percent annual pace from October through December, compared with an initial projection of 4.2 percent. For the first quarter, income growth was revised up to 4.7 percent from 4.4 percent.
Labor market softens
Income growth may slow in coming months as the labor market softens. The U.S. has lost jobs for four consecutive months this year, and payrolls may post another decline for May, according to the Bloomberg survey.
The gain in growth last quarter would have been even larger if not for a reduction in estimates for inventories.
Companies cut stockpiles at a $14.4 billion annual rate, compared with an initial estimate of a $1.8 billion gain. The figures added 0.2 percentage point to growth, less than the previously estimated contribution of 0.8 percentage point.
A measure of total sales, which strips out stockpiles, was revised to a gain of 0.7 percent at an annual rate rather than a 0.2 percent drop. Sales rose at a 2.4 percent pace in the fourth quarter.
There are signs that demand is slowing even more. Auto sales in April slid to a 14.4 million annual rate, the lowest level since 1998, figures show. Spending this quarter will grow at a 0.5 percent pace, the smallest gain since 1991, according to the median estimate in a Bloomberg survey.