Services, investment make US growth less tepid than estimated

A now hiring sign is posted in front of an oil changing business in Baton Rouge, Louisiana, on May 5, 2017.
A now hiring sign is posted in front of an oil changing business in Baton Rouge, Louisiana, on May 5, 2017.PHOTO: AFP/GETTY IMAGES

WASHINGTON (BLOOMBERG) - The US economy's first quarter wasn't so miserable after all, as consumption contributed more to growth and business investment was even stronger than thought, Commerce Department data showed Friday.

The second estimate of first quarter gross domestic product showed a rise at 1.2 per cent annualized rate, while consumer spending, the biggest part of the economy, rose 0.6 per cent

While the revisions were more positive than economists generally expected, the report reinforces that 2017 got off to a relatively weak start, a trend that's plagued the US economy for several first quarters. Still, business investment was even brighter than previously estimated, thanks to fresh data on construction spending and companies' research and development expenses.

Economists and Federal Reserve policy makers are betting on a second-quarter rebound with the consumer leading the way, as Americans remain confident amid steady job growth and the promise of fatter paychecks.

Part of the revision to consumption spending was due to electricity-usage data for February, indicating that energy bills during the unusually warm weather weren't as low as thought. That drag is one of the reasons that economists view the first-quarter slowdown as transitory.

Inventories subtracted 1.07 percentage point from growth in January through March, revised from 0.93 percentage point. Net exports added 0.13 percentage point to GDP growth while nonresidential fixed investment, or spending on equipment, structures and intellectual property, rose at 11.4 percent annualized pace, a five-year high, revised from 9.4 per cent