WASHINGTON—The U.S. economy's first-quarter slowdown was less pronounced than initially thought, and recent data have pointed to a pickup for growth this spring.

Gross domestic product, a broad measure of goods and services produced across the U.S. economy, expanded at a 0.8% seasonally adjusted annual rate in the first three months of 2016, the Commerce Department said Friday.

That was up from the agency's initial estimate last month, which pegged the first quarter's growth rate at 0.5%. Economists surveyed by The Wall Street Journal expected growth would be revised up to a 1.0% pace.

Economic activity had expanded at a 1.4% pace in the fourth quarter of 2015. On an annual basis, GDP grew 2.0% in the first quarter, identical to the fourth quarter's annual growth rate.

Revisions were fairly modest. Compared with last month's report, the latest figures showed a larger gain for residential investment and smaller drags on overall growth from private inventories and foreign trade.

Friday's report also offered the first official estimate of U.S. corporate profits during the first three months of the year. Profits after tax, without inventory valuation and capital consumption adjustments, rose at a 1.9% rate from the fourth quarter.

The rebound came after two consecutive quarters of falling profits. Still, profits were down 3.6% last quarter compared with a year earlier.

A separate measure that more closely aligns with economic output, pretax profits with inventory valuation and capital consumption adjustments, rose at a more modest 0.3% rate in the first quarter and declined 5.8% from a year earlier.

The output data were adjusted for inflation, but profits data didn't account for price changes.

At a time of slow economic growth around the world, "it's really hard for these companies to find growth anywhere," said Christine Short, senior vice president at analytics firm Estimize. But while falling energy prices and a strengthening dollar have squeezed earnings in recent quarters, she said those headwinds appear set to fade as oil prices and the dollar stabilize.

The profits picture "does look to incrementally get better" over the course of 2016, Ms. Short said.

Deere & Co. last week reported a 4% drop in equipment sales and a 28% decline for profits in the three months ended April 30 compared with a year earlier. The Moline, Ill.-based farm and construction machinery manufacturer said it expects a 9% decline in sales this fiscal year as it faces "the continuing impact of the downturn in the global farm economy and further weakness in the construction equipment sector," Chief Executive Samuel Allen said in a statement.

But Santa Clara, Calif.-based computer chip maker Nvidia Corp. said its profit surged 46% in the latest quarter compared with a year earlier. "We're seeing great traction in gaming," which is "just a larger and larger market," Chief Executive Jen-Hsun Huang told analysts earlier this month.

U.S. economic growth has frequently followed the same pattern since the recession ended nearly seven years ago: a weak first quarter followed by a second-quarter rebound. This year may be no exception. Recent readings on industrial production, retail sales and foreign trade have all pointed to stronger growth in the spring months.

"If the problem of seasonal adjustment remains, which I am of the opinion that it does, the growth over the rest of the year should be considerably more upbeat than what transpired in the first quarter," Federal Reserve Bank of Philadelphia President Patrick Harker said Monday.

Forecasting firm Macroeconomic Advisers on Thursday estimated GDP growth would pick up to a 2.5% pace in the current quarter. The Federal Reserve Bank of Atlanta's GDPNow model projected the second-quarter's growth rate at 2.9%.

Consumer spending, which generates the majority of U.S. economic output, expanded at a 1.9% pace in the first quarter, unchanged from the earlier estimate.

Household outlays, the housing sector and spending by state and local governments all provided positive contributions to growth in the first quarter. Business investment, inventories and foreign trade were drags on growth.

An alternative measure of U.S. economic activity produced by the Commerce Department, gross domestic income, expanded at a 2.2% pace in the first quarter, up from the fourth-quarter's growth rate of 1.9%.

The agency on June 28 will release additional revisions to first-quarter output data.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com and Jeffrey Sparshott at jeffrey.sparshott@wsj.com

 

(END) Dow Jones Newswires

May 27, 2016 08:55 ET (12:55 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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