The economy shrank at 0.7% annual pace in the first quarter owing to a smaller inventory buildup and weaker net exports than previously reported, revised figures show. Originally the government had said the economy grew by 0.2% in the first three months of the year. Wall Street was expecting gross domestic product to be marked down. Economists polled by MarketWatch had forecast a revised 1% decline in GDP. The increase in consumer spending, the main engine of U.S. growth, was little changed at 1.8%. Yet the value of inventories, which adds to GDP, increased by a smaller $95 billion instead of $110.3 billion. Exports fell a somewhat larger 7.6% while the increase in imports was revised up sharply to 5.6% from 1.8%. A bigger trade deficit subtracts from GDP. Businesses invested more in equipment than initially estimated, but spending on structures such as oil rigs fell precipitously. Economists expect U.S. growth to rebound in the second quarter, with most forecasting GDP to rise around 3%. The same pattern occurred in 2014.
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