Friday, April 30, 2010; 8:37 AM
WASHINGTON - The U.S. economy grew at a slightly slower-than-expected pace in the first quarter, held back by inventories and exports, but resurgent consumer spending offered evidence of a sustainable recovery, a government report showed on Friday.
Gross domestic product expanded at a 3.2 percent pace, the Commerce Department said in its first estimate -- marking three straight quarters of growth as the economy climbs out of the worst recession since the 1930s.
Analysts polled by Reuters had forecast GDP, which measures total goods and services output within U.S. borders, growing at a 3.4 percent rate in the first three months of 2010 after a 5.6 percent growth pace in the fourth quarter.
Despite the slowdown from the prior quarter, details of the report were fairly upbeat, with consumer spending accelerating at a 3.6 percent rate, more than double the 1.6 percent pace in the fourth quarter. The first-quarter rise was the largest since the first quarter of 2007.
Consumer spending, which normally accounts for 70 percent of U.S. economic activity, added 2.55 percentage points to GDP last quarter, the biggest percentage contribution since the fourth quarter of 2006.
Business inventories increased $31.1 billion in the first quarter as businesses restocked to meet firming domestic demand, the first increase since the first quarter of 2008. Inventories contributed 1.57 percentage points to GDP, less than half the contribution in the last three months of 2009 when businesses became less aggressive in clearing their warehouses.
When businesses slow the rate at which they are liquidating inventories, manufacturers raise production and this boosts GDP. Inventories fell $19.7 billion in the last quarter of 2009.
Excluding inventories the economy expanded at a 1.6 percent rate following a 1'.7 percent pace in the fourth quarter.
Businesses continued to spend on software and equipment, though a bit less vigorously than in the prior quarter. Business investment rose at a 4.1 percent rate after a 5.3 percent pace in the fourth quarter.
New home construction, which showed some hesitancy early this year, was a drag on growth in the first quarter -- after two quarters of gains. Residential investment contracted at a 10.9 percent rate after growing at a 3.8 percent pace in the fourth quarter.
Spending on structures subtracted from GDP for a sixth straight quarter. Export growth slowed sharply to a 5.8 percent pace in the first quarter from a 22.8 percent rate in the prior period, while imports rose at an 8.9 percent rate. That left a trade deficit that chipped off 0.61 percentage point from first-quarter GDP.