US raises first quarter growth estimate to 0.8%

The US economy grew slightly faster in the first quarter of 2016 than originally thought, hitting a 0.8 percent annual pace, the Commerce Department said Friday.

The revision, from the original estimate of a very slow 0.5 percent expansion, was not as high as economists had expected, underscoring some persistent weakness, especially in manufacturing.

As in the original estimate, which was based on less complete data on gross domestic product, the main reason for the first quarter slowdown was a significant decline in business investment in buildings and equipment.

The first quarter slowdown was attributed to a decline in business investment in buildings and equipment

The first quarter slowdown was attributed to a decline in business investment in buildings and equipment ©Joe Raedle (Getty/AFP/File)

Part of that is linked to the sharp contraction in the energy industry, particularly oil and gas, after the crash in crude prices.

But on top of that, there was also a slowdown in consumer spending growth, despite an increase household incomes due to strong job creation.

What improved the picture in the new estimate was higher business investment in inventory and stronger home construction than originally thought.

Even so, the upward revision did not tell a lot about how strongly the economy is rebounding in the current April-June quarter.

The energy industry has continued to cut back and the strong dollar and weak foreign economies continue to hamper exports.

But home construction and consumer spending have improved.

The report gave little new information to markets waiting for signs of strength in the economy that would push the Federal Reserve to increase interest rates in June or July.

The dollar gained very slightly on the euro after the report, to $1.1165, and the yield on the one-year Treasury bill ticked up a notch to 0.66 percent from 0.65 percent.

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