US economy weaker than estimated in first quarter

By VERONICA SMITH
May 28, 2010, 3:51pm

WASHINGTON, May 28 (AFP) – The fragile US recovery from recession was weaker than estimated in the first quarter, official data showed Thursday, suggesting tougher challenges from the European debt crisis.

The Commerce Department said gross domestic product in the first quarter increased at a 3.0 percent annual pace from the fourth quarter of 2009, lowering its original estimate of 3.2 percent.

The downward revision for the world's largest economy surprised most analysts, who predicted GDP -- a broad measure of the country's goods and services output – expanded 3.3 percent.

''This is a fairly tepid recovery that is fighting a lot of headwinds,'' said Joel Naroff of Naroff Economic Advisors.

''It will be hard to grow rapidly when the economy has to overcome limited credit availability, a modest recovery in housing, high unemployment rates and, as a consequence, depressed consumer confidence... and uncertainty in Europe.''

Several analysts said recent economic data pointed to stronger growth in the current second quarter.

Nigel Gault, chief US economist at IHS Global Insight, predicted growth of about 4.0 percent in the April-June period because of a surge in manufacturing output and a rise in home building spurred by an expiring homebuyers' tax credit.

''But that pace cannot be maintained, especially given the renewed turmoil in the financial markets triggered by the eurozone's sovereign debt crisis, and we expect growth to fall back into the 2.5-3.0 percent region in the second half of the year,'' Gault said.

The Commerce Department said it had shaved 0.2 percentage points from its first estimate on April 30 largely because of higher imports and lower consumer spending.