U.S. News

Economy Grew 0.7% in First Quarter; Inflation Gauge Higher


The economy grew at a 0.7% annual pace in the first three months of this year, the weakest in more than four years but slightly better than previously estimated, data showed.

It was the weakest quarterly expansion in gross domestic product, or GDP, since 2002. The slowdown came as businesses sold off inventories, though consumer spending remained strong.

However, the report's inflation gauge, the Personal Consumption Expenditures price index, showed price pressures were stronger than expected.

"There's not anything here that shows much of a change. But the higher inflation is what folks are focusing on. It's a little disconcerting," said Mark Vitner, economist at Wachovia securities in Charlotte, N.C.

The GDP report, the final of three estimates, was slightly better than the government's earlier reading of 0.6% growth during the quarter but a tad weaker than the 0.8% growth economists were expecting.

A separate report by the Labor Department showed initial claims for U.S. jobless aid fell to 313,000 last week. This was slightly lower than expected, reflecting continued strength in the job market, and may also contribute to concerns about inflation.

Analysts polled by Reuters were expecting claims to slip to 318,000 in the week ending June 23 from the previous week. However, new jobless claims were revised to 326,000 from 324,000 in the week ending June 16.