Economy grows at slow rate during first quarter

WASHINGTON (AP) The U.S. economy limped along in the first three months of the year at a pace slightly slower than the government previously thought. The biggest drag on growth came from companies struggling to get rid of their unsold goods.

Gross domestic product grew at an annual rate of 1.2 percent from January to March, according to revised figures released by the Commerce Department Friday.

The weak economy and higher energy prices took a bite out of U.S. companies' profits in the first quarter, which registered their biggest decline in three years.

Most economists expected the government's final first-quarter reading on GDP to be unchanged from the 1.3 percent rate of growth estimated a month ago. The government originally reported that the economy grew at a 2 percent rate in the first quarter.

Many analysts believe the economy grew at a barely discernible 0.5 percent rate in the current April-June quarter, though some predict it didn't grow at all or actually slipped into reverse. The government's estimate of second-quarter GDP won't be released until late July.

The second quarter will probably turn out to be the weakest quarter of the year, economists say, and possibly mark the lowest point for the economy since it entered a period of sub-par growth in the second half of last year.

To stave off recession, the Federal Reserve has cut interest rates six times this year. The latest reduction, on Wednesday, was the first to be by a more conservative quarter-point; the other five were by bolder half-points each.

Economists are hopeful the economy will rebound by the fourth quarter of this year as the Fed's interest rate cuts and Congress' tax-cut refunds of up to $600 take hold.

One of the forces that has weighed down the economy is high enery prices, which has dampened consumer and business spending and taken a bite out of corporate profits. Sharp spikes in energy prices preceded the last three U.S. recessions

In a speech Thursday Fed Chairman Alan Greenspan said the country should be able to escape its current energy problems without long-term harm.

Friday's report also showed that the economic slowdown and higher energy costs took a toll on consumers.

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