U.S. 1st quarter growth seen weakest since 2002

WASHINGTON (Reuters) - The U.S. economy braked sharply in the first quarter, growing at its slowest pace in over five years as consumers curbed spending and jobs disappeared, a Reuters poll forecast.

It said gross domestic product, the broadest measure of total economic activity within U.S. borders, likely crept ahead at a slim 0.2 percent annual rate in the first three months this year, down from 0.6 percent growth in the fourth quarter.

The 89 estimates ranged from shrinkage of 0.8 percent to growth of 1.5 percent.

Earlier, many analysts thought the economy might contract in the first quarter but recent data showing inventories were built up more strongly that originally anticipated led them to revise forecasts to show at least tepid growth.

A rise in inventories supports growth since it means that production is being maintained at high levels but, if it is not sustained by sales, can turn into weakness in coming quarters.

"A $5 billion accumulation of stocks would add almost a full percentage point to GDP growth and, in our forecast, constitutes the difference between a positive and a negative result," RBS Greenwich Capital said in a note to clients.

Still, a first-quarter GDP growth rate of 0.2 percent would be the weakest since the fourth quarter of 2002. Jobs were lost in each of the first three months of 2008 and concern remains that the economy is at heightened risk of slipping into recession this year.

A recession is defined as a minimum of two back-to-back quarters in which GDP shrinks, something that has not happened since 2001. Continuing turmoil in credit markets together with a steep slump in homebuilding and sales is widely seen as putting the economy in danger of another downturn.

Since the fourth quarter of 2001, the economy has expanded steadily but showed increasing signs as 2007 ended of losing vigor under the strain of a slumping housing sector and soaring energy prices that have taken a toll on consumer confidence.

The following is a selection of comments from economists:

UBS

Forecast: Unchanged

"Real GDP was probably close to flat in Q1. That is not as weak as the -1.0 percent annual rate we have been forecasting for the last few months, with much of the difference reflecting less weakness than expected in consumption, along with a modest boost from inventory building."

IDEAGLOBAL

Forecast: -0.1 percent

"We have revised our original estimate of a -0.5 percent decline in output up four-tenths of a point to -0.1 percent on the back of an unexpected increase in core shipments in the durable goods category for March and the much-greater-than-expected inventory build throughout the first three months of the year."