U.S. Economy Grows Much More Than Initially Estimated In Q1

A report released by the Commerce Department on Friday showed that the U.S. economy grew by much more than initially estimated in the first three months of the year.

The Commerce Department said gross domestic product climbed by 1.2 percent in the first quarter compared to the previously reported 0.7 percent increase.

Economists had been expecting a more modest upward revision to the pace of GDP growth to approximately 0.9 percent.

Despite the bigger than expected upward revision, the GDP growth in the first quarter still reflects a notable slowdown compared to the 2.1 percent increase in the fourth quarter.

ING Senior Economist James Knightley noted the upwardly revised first quarter GDP growth is still poor relative to the majority of other developed markets.

"There were slight improvements in all of the key components, but it is still a very disappointing outcome, mainly caused by a clear slowdown in consumer spending and a run down in inventories," Knightley said.

He added, "The Federal Reserve remains of the view that this softer growth period is 'transitory,' but the high frequency numbers for the second quarter are not exactly pointing to a huge rebound."

The pace of consumer spending growth in the first quarter was upwardly revised to 0.6 percent from 0.3 percent, although it compares to the 3.5 percent jump in the fourth quarter.

The Commerce Department said upward revisions to non-residential fixed investment and state and local government spending were partly offset by a downward revision to private inventory investment.

Meanwhile, a reading on core consumer prices, which exclude food and energy prices, showed that the pace of price growth accelerated to 2.1 percent in the first quarter from 1.3 percent in the fourth quarter.