WASHINGTON, May 24: US economic output roared 5.6 per cent higher in the first quarter of 2002, the government said on Friday, slower than first estimated but still the fastest pace in nearly two years.

Consumer spending and business investment — the two critical components of a sustainable recovery — were weaker than earlier thought, the data showed. But companies were fighting their way out of the doldrums, posting their first improvement in after-tax profits in a year and a half, the Commerce Department said.

The gross domestic product disappointed economists, who had expected an upgrade to the first estimate of 5.8 per cent annualized growth. But their recovery scenario survived mostly intact.

“On the whole, we find this report a little on the disappointing side relative to the advance report,” said HSBC economist Ian Morris.

“Although it takes a little shine off the recovery profile, it does not derail the story,” he added.

First-quarter economic growth was revised lower after fresh data showed business and consumer spending weaker than first thought.

Among the data coming in worse than earlier estimated: Spending on big-ticket items such as cars and washing machines plunged 9.6 per cent, and business investment tumbled 8.2 per cent.

Also slightly weaker than first believed: Federal government expenditure rose 6.7 per cent, and consumer spending — which accounts for two-thirds of the US economic activity — expanded 3.2 per cent.

“The difference is trivial at this pace of growth but does reflect more complete data on a spectacular quarter,” said a report by Citigroup/Salomon Smith Barney.

“The downward revisions occurred in consumer durables, business investment and in government spending, all offsetting slightly higher numbers for inventories and trade.

After-tax corporate profits edged up 0.9 per cent in the first quarter — the first increase in one and a half years — after diving 10.6 per cent in the fourth quarter.

Pre-tax operating profits rose 3.7 per cent in the first quarter, compared with a 9.0 per cent drop in the fourth quarter.

“Underneath the surface, the stirrings of a profit fight-back are evolving,” said Morris.

Economic growth was powered largely by businesses reducing their reliance on stockpiles.

—AFP