--US Q1 GDP revised to +1.3% vs 2.0%
--US Q1 final sales revised to +4.4% vs 4.6%
--US net inventories subtracted 3.0 point from Q1 GDP vs -2.7 point
--US Q1 net inventory subtraction sharpest in 13 years
--US Q1 consumer spending revised to +2.9% vs 3.1%
--US net exports added 1.1 point from Q1 GDP vs +1.4 point
--US Q1 capital spending revised to +2.1% vs +1.1%
--US Q1 government spending revised to +4.7% vs +4.0%
--US Q1 GDP PCE price index revised to +3.2% vs +3.3%
--US Q1 core GDP PCE price index revised to +2.6% vs 2.7%
--Q1 GDP price deflator revised to +3.3% vs 3.2%

By Simon Kennedy
Washington, May 25 (BridgeNews) - Softer consumer spending, a bigger reduction in inventories and lower exports left the U.S. economic expansion weaker in the first quarter than originally thought. Gross domestic product grew just 1.3% from January to March, the Commerce Department reported Friday, below expectations of 1.4% and the government's initial estimate of 2.0%.
* * * Inventories were a larger drag on growth than first reported, knocking 3.0 percentage points off the first quarter expansion, the biggest such subtraction in 13 years. In the advance report last month, inventories subtracted 2.7 points from first quarter growth.
The drop in stockpiles will encourage those who believe that the recent economic slowdown merely reflects a rebalancing of bloated supplies with slack demand. The bigger subtraction may indicate that process is well advanced, suggesting a near-term growth recovery.
New, weaker data on consumer spending growth was another reason for the downward revision to GDP. Responsible for two-thirds of output, it grew 2.9% having initially logged a 3.1% increase.
Final sales, which measure GDP excluding inventories, rose a revised 4.4%, below the 4.6% increase first recorded.
A third factor reducing growth was a larger-than-expected trade deficit in March, which meant net exports lifted growth by 1.1 percentage points in the first quarter. They added 1.4 points in the government's advance report.
However, capital spending, a lynchpin of growth in recent years given its productivity-boosting effects, rose 2.1%, stronger than the 1.1% gain last reported. The Federal Reserve last week cited the outlook for corporate outlays as a key concern when it cut interest rates for the fifth time in as many months. Business spending on structures climbed 17.2%, after the 11.0% last reported.
The economy, which this year may not even manage to post half the 5.0% growth rate of 2000, has been fading since last summer. It grew just 1.0% in the fourth quarter. Most analysts link the deceleration to an unwinding of outsized inventories and investment. High energy prices and a stock market sell-off have also taken their toll.
The Federal Reserve has sought to combat such weakness by slashing interest rates 2.5 percentage points since January, to 4.0%--the lowest in seven years.
The Bush administration is hoping that easing of monetary policy and lower taxes will boost the economy by the year-end. Treasury Secretary Paul O'Neill has frequently referred to growth less than 3.5% as below potential.

INFLATION
The report contained some poor news regarding inflation. The GDP price deflator rose at a 3.3% pace and the consumer price index increased 3.2%. The core consumer spending price index was up 2.6%.

WHAT WAS EXPECTED:
The BridgeNews survey of economists' estimates for GDP figure ranged from up 0.9% to up 2.2%. The final sales projections ranged from up 4.1% to up 4.8% with the consensus at up 4.4%. The PCE index was expected to rise 3.3%, while the price deflator was pegged at 3.2%.