1st-quarter GDP gain is revised downward

The U.S. government slashed its estimate for first-quarter economic growth Wednesday, offering a cautionary note on the recovery.

Gross domestic product expanded at a 1.8 percent annual rate in the quarter, the Commerce Department said. The economy was previously reported to have grown at a 2.4 percent pace after a gain of 0.4 percent in the final three months of last year.

Almost all categories were revised lower, with the exception of home construction and government. Economists polled by the Reuters news agency had expected that GDP growth would be unrevised.

The biggest surprise was consumer spending, which grew at a 2.6 percent pace, not the 3.4 percent rate previously estimated. The revision to consumer spending, which accounts for more than two-thirds of U.S. economic activity, sliced more than a half percentage point off the GDP growth rate.

Even given the revision, consumer spending picked up from the fourth quarter despite a rise in taxes, and recent gains in consumer sentiment suggest households are not pulling back.

Growth in the first quarter was also weighed down by weak exports, which contracted at a 1.1 percent pace in the first quarter in a probable reflection of a global economic slowdown.

— Reuters

Senators: More time needed on swap rules

U.S. regulators will inject risk into the derivatives market if they don’t take more time to coordinate Dodd-Frank Act rules with their overseas counterparts, six Democratic senators said.

The Commodity Futures Trading Commission, facing a July 12 deadline to determine the overseas reach of its rules, should take additional time to coordinate oversight with other regulators, the senators said in a letter Wednesday to Treasury Secretary Jack Lew.

“Creating an overly complicated compliance system for market participants will result in conflicting, duplicative or inconsistent rules that could foster new and unforeseen risks and lead to international regulatory arbitrage,” the senators said. “More time is needed for domestic harmonization and sequencing with regulations that occur abroad.”

The letter was signed by Sens. Kirsten Gillibrand of New York, Thomas R. Carper of Delaware, Kay Hagan of North Carolina, Heidi Heitkamp of North Dakota, Michael F. Bennet of Colorado and Charles E. Schumer of New York.

The international reach of the CFTC swap trading requirements has been one of the most controversial elements of the agency’s Dodd-Frank Act rules, prompting opposition from such financial companies as Goldman Sachs and Barclays.

CFTC Chairman Gary S. Gensler said Tuesday that his agency should push through its cross-border derivatives guidance by July 12 and opposed a proposal from a fellow Democrat on the commission, Mark Wetjen, for “interim final guidance” that could be amended based on industry and public feedback.

— Bloomberg News

Also in Business

l  Monsanto, the world’s largest seed company, reported that its third-quarter earnings fell 3 percent to $909 million. Chairman and CEO Hugh Grant said profit fell because last year’s U.S. drought required more seed to be shipped from South America in the quarter, and the company didn’t pass on the higher costs to customers. Gross profit in the unit that makes the herbicide Roundup rose 31 percent because of higher prices while profit in the larger seed unit declined 10 percent.

l  Dish Network said Wednesday that it was giving up on its quest to buy Clearwire, putting an end to a bidding war with Sprint Nextel, which raised its offer for the wireless company last week. Sprint revised its buyout offer for Clearwire to $5 per share last Thursday and announced support from a key group of dissident shareholders. Clearwire shareholders will vote on the Sprint bid July 8. Dish also lost out on a larger bid for Sprint, whose shareholders voted Tuesday in favor of a sweetened takeover offer from Japan’s Softbank.

l  Starbucks baristas must share their tips with shift supervisors, but assistant managers are left out in the cold, New York’s highest court ruled Wednesday. The ruling, responding to two lawsuits, backed Starbucks’ policy of divvying up the tips, saying it’s consistent with labor law. Hospitality industry groups say the state court decision will probably affect policies at similar restaurants and coffeehouses.

l  Coca-Cola announced plans Wednesday to introduce a cola that is sweetened with sugar and the naturally occurring, no-calorie sweetener stevia. Coca-Cola Life will have about half the calories of regular Coke. It will go on sale this week in Argentina. The world’s largest soda company has used stevia in 45 products, such as Vitaminwater Zero and Fanta Select, but never in its flagship cola. There is no date for introducing the product elsewhere.

l  Maurice “Hank” Greenberg can continue his lawsuit challenging the U.S. bailout of his former company, American International Group, without shareholder derivative claims on behalf of the insurer, a judge ruled. Greenberg and other minority shareholders “have adequately alleged that they conveyed a portion of the economic value and voting power to the government and as a result suffered a direct and substantial impact to their own property rights,” Judge Thomas C. Wheeler of the Federal Claims Court in Washington wrote.

— From news services

Coming Today

l  8:30 a.m.: Weekly jobless benefits claims and personal income data for May released.

l  10 a.m.: Freddie Mac releases weekly survey on fixed-rate mortgages.

l  Earnings: Nike.