INSTANT VIEW: U.S. economy grows slightly better than expected

NEW YORK (Reuters) - The U.S. economy grew at an upwardly revised 0.9 percent in the first quarter, slightly better than previously thought because of lower demand for foreign goods and services and a rise in investment in non-residential structures, the Commerce Department said on Thursday.

The number of U.S. workers filing new claims for jobless benefits rose slightly more than expected last week, the government said on Thursday.

KEY POINTS:

GDP * The department estimated a month ago that gross domestic product, which measures the total output of goods and services within U.S. borders, grew at a 0.6 percent rate. But it raised the growth estimate to take into account updated economic and trade data. * Growth in the January-March quarter was in line with economists' expectations for a revision to 0.9 percent growth after the economy grew 0.6 percent in the fourth quarter of 2007.

JOBLESS CLAIMS * Initial claims for state unemployment insurance benefits climbed to 372,000 in the week ended May 24 from an upwardly revised 368,000 for the prior week, the Labor Department said. * Analysts polled by Reuters were expecting 370,000 in new claims, up from the originally reported 365,000 in the prior week.

COMMENTS:

DOUG ROBERTS, CHIEF INVESTMENT STRATEGIST,

CHANNELCAPITALRESEARCH.COM, SHREWSBURY, NEW JERSEY:

"We're at 0.9 percent in the first quarter versus 0.6 in the fourth-quarter, that's a slight uptick. That's logical with the stimulus starting to kick into gear on the fiscal and monetary side. Nobody's going to allow the economy to fall into a recession during an election year if they can avoid it. None of the underlying problems are being solved, but the legislative and executive branches are rushing in with stimulus to cushion it as fast as possible, so what you're going to see is the market start to stabilize, assuming oil doesn't go up to $160-$170 a barrel. At the very least a recession is postponed. Whether we can rally is going to depend on oil."

ALAN LANCZ, PRESIDENT, ALAN B. LANCZ & ASSOCIATES INC, TOLEDO,

OHIO:

GDP: "I don't really think anything major as far as either direction as far as influencing the stock market so I think there are other catalysts out there that will affect the market like oil prices.

"With the price of gas at $4 a gallon for the first time I think it is going to affect the consumer and the consumer is big part of the U.S. economy. To me that's more important and more on the investor radar than the GDP."

DAVID SLOAN, ECONOMIST, 4CAST LTD, NEW YORK:

"There are no real surprises in the numbers. The GDP breakdown is pretty much in line with our expectations. The jobless claims trend has been very stable recently, suggesting the labor market is still sort or weak but not deteriorating with modest losses in employment. This does not change much for the Fed."

NICK BENNENBROEK, CURRENCY STRATEGIST, WELLS FARGO, NEW YORK:

"You could argue these figures are as advertised. There isn't too much surprise here. The GDP revision was bang on, jobless claims were close to forecast. Of course, 0.9 percent growth is hardly a stellar performance for the economy, but things looked worse back in January when the job figures were turning negative. The underlying domestic demand in the economy showed slight improvement. It's probably consistent with the Fed being on hold in June and several months after that, and consistent with euro trading in the broad range it's been in against the dollar. The data should help the dollar trend higher within the existing range."

PIERRE ELLIS, SENIOR GLOBAL ECONOMIST, DECISION ECONOMICS INC.,

NEW YORK:

GDP: "It's considerably stronger reading because the inventory situation was made even tighter. There was better construction spending across the board. But this is not the sort of thing that is building momentum."

"The inflation readings are incrementally better, especially the core PCE which the Fed watches closely."

"The Fed is probably on hold even though they are not totally comfortable. They will let events play out for a little while. They are quite aware the situation can change quite quickly."

JOBLESS CLAIMS: "The flows of layoffs are steady, even down a bit from last month. But we are getting poor indications with hirings. Continued claims continued to rise steadily. This means new hirings have weakened and high uncertainty among businesses. If this continues, larger layoffs will surely come. We will see what the payroll data will reveal; we are looking for a 100,000 drop in May."

STEPHEN MALYON, SENIOR CURRENCY STRATEGIST, SCOTIA CAPITAL,

TORONTO:

"Things conformed reasonably closely to expectations although the mix of growth in the first quarter looks healthier. Inventories accounted for a much smaller share of the increase in GDP while final domestic demand also received an upward revision. The underlying components were expected to reveal more broad based growth than the advanced report. It maintains the bullish bias for the dollar that we saw get underway yesterday following the durable good orders report and the hawkish comments from Fisher yesterday evening."

MARKET REACTION: * BONDS: U.S. Treasury debt prices pare losses * CURRENCIES: U.S. dollar holds gains versus euro, yen * STOCKS: U.S. equity index futures slip * RATE FUTURES: U.S. short-term interest rate futures were unchanged, pricing in a zero percent probability of a 25 basis point rate cut at the Fed's June meeting.