May 31 (Bloomberg) -- The U.S. economy grew more slowly in the first quarter than previously estimated, reflecting smaller gains in inventories and bigger government cutbacks.
Gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate, revised Commerce Department figures showed today in Washington. The report also showed corporate profits rose at the slowest pace in more than three years and smaller wage gains at the end of 2011.
Consumer spending at retailers and car dealerships kept the economy moving forward last quarter just as businesses investment cooled, showing why the economy needs to generate bigger job gains to sustain the expansion. The threat of a slump in Europe adds to concerns the U.S. recovery will struggle to gain speed.
“Growth comes down to the consumer and whether the consumer can pick up the baton and actually carry this recovery,” Aneta Markowska, a senior U.S. economist at Societe Generale in New York, said before the report. “In the first quarter, they performed pretty well. I’m concerned that won’t be sustained because we know it was driven by better employment numbers that are already fading.”
Other reports today showed more Americans than projected filed claims for jobless benefits last week and companies added fewer workers than forecast in May.
First-time applications for unemployment insurance payments increased by 10,000 to 383,000 in the week ended May 26 from a revised 373,000 the prior week, the Labor Department reported. They exceeded the median estimate of 370,000 in a Bloomberg News survey of economists.
Figures from Roseland, New Jersey-based ADP Employer Services showed payrolls increased by 133,000 this month following a revised 113,000 gain in April. The median estimate of 39 economists surveyed by Bloomberg called for a May advance of 150,000.
Stock-index future trimmed earlier gains after the reports. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.2 percent to 1,311.5 at 8:35 a.m. in New York. They had been up as much as 0.6 percent earlier.
Growth forecasts from the 79 economists surveyed ranged from 1.6 percent to 2.2 percent. The world’s largest economy expanded at a 3 percent rate in the prior three months.