* First-quarter GDP seen at 2.5 pct, slight slowdown from Q4
* Sturdy consumer spending expected after robust auto sales
* Inventories not giving as big a boost as in 4th quarter
* Mild winter helps, but data to show underlying strength
By Lucia Mutikani
WASHINGTON, April 27 U.S. economic growth likely
cooled modestly in the first quarter as replenishing of
inventories by businesses slowed, though stronger demand for
automobiles and a lift to homebuilding from warm weather blunted
Gross domestic product is expected to have expanded at a 2.5
percent annual rate, according to the median of a Reuters poll.
That would be a moderation from the fourth quarter's 3.0
percent pace, but decidedly stronger than economists'
predictions early in the quarter for growth below the 1.5
In some ways Friday's report on GDP should stack up well
when compared with data for the fourth quarter. In the final
three months of last year, inventory building accounted for
nearly two thirds of the economy's growth; in the first quarter,
demand from businesses and consumers is expected to have taken
up the slack.
"The main growth driver was consumer spending, which we
expect increased at the fastest since late 2010 as car sales
went through the roof," said Harm Bandholz, chief U.S. economist
at UniCredit Research in New York.
The Commerce Department will release its first snapshot of
first-quarter GDP on Friday at 8:30 a.m. (1230 GMT).
Details of the report are expected to offer a picture of
underlying strength, with even home construction poised to rise
at its fastest pace since the second quarter of 2010 thanks to
the unusually warm winter.
Such growth could further reduce the odds of a third round
of bond purchases by the Federal Reserve to lift the economy.
Fed Chairman Ben Bernanke on Wednesday expressed comfort with
the current stance of Fed policy, but held out the prospect of
more bond buying if the economy deteriorated.
Americans stepped up spending on automobiles in the first
quarter, with motor vehicle sales rising by the most in four
years. Part of that reflected pent-up demand after last year's
earthquake and tsunami in Japan disrupted supplies and left
showrooms bereft of popular models.
And encouraged by a spurt in job growth, some households may
have replaced older vehicles after tightening their belts during
the 2007-09 recession.
But with the labor market showing early signs of fatigue
after employment growth averaged 246,000 per month between
December and February, consumer spending could soften in the
SLOWER GROWTH SEEN FOR SECOND QUARTER
"We are going to see growth slow this quarter, reflecting
the weather-related pay back," said Ryan Sweet, a senior
economist at Moody's Analytics in West Chester, Pennsylvania.
"We are also going to see manufacturing shifting to a lower gear
because of the recession in Europe, which will hurt U.S.
Some gauges of regional factory activity eased as the second
quarter started, and consumer confidence ebbed. In addition,
first-time applications for unemployment benefits have spiked in
recent weeks, although many economists pin the rise on seasonal
While the unseasonably warm weather helped the economy by
boosting home building and renovations, it undercut demand for
utilities, spending at ski resorts and sales of winter apparel.
As a result, weather was probably not the biggest
contributor to growth during the quarter.
Inventories probably also helped GDP growth, just not nearly
as much as in the fourth quarter. Inventories, however, are a
bit of a wild card because the government only has data for
January and February.
Excluding inventories, GDP is expected to have risen at a
rate of about 2.2 percent, which would signal firming demand. In
the fourth quarter, the comparable figure was just 1.1 percent.
Should first-quarter growth meet expectations, that could
help to explain the solid job gains seen in the first two months
of the year, even if the quarter ended on a soft note.
U.S. employers added 275,000 workers to their payrolls in
January and 240,000 in February, but only 120,000 in March.
Growth probably benefited from a general lack of inflation
pressures, even though gasoline prices soared.
"Overall prices for the entire economy seem to be moderating
a little relative to what we saw last year in the first quarter
and that will boost economic growth after you adjust for
inflation," said Anthony Chan, chief economist at JPMorgan
Private Wealth Management in New York.
Elsewhere, growth in the first quarter was likely supported
by a rebound in government defense spending. Business spending
on equipment and software is expected to have increased for an
11th straight quarter.
Economists expect trade will be a minor drag on