U.S. Q1 GDP revised up to 1.0 pct growth on exports, consumer spending 

WASHINGTON - The U.S. economy grew a tad faster in the first quarter than was previously thought, providing further evidence the country may have avoided a recession, though a key measure of inflation continued to rise.

The Commerce Department said higher exports, more consumer spending and higher business investment boosted growth.

The economy grew at a 1.0 percent annualized pace in the first quarter, upwardly revised from the 0.9 percent in the second estimate released a month ago.

The upward revision was in line with expectations of economists polled by Thomson Reuters IFR Markets. Thursday's report "further underscores the fact that, despite the serious headwinds and economic strains caused by rising energy prices, the U.S. economy has not contracted," said Marc Chandler of Brown Brothers Harriman.

Annual revision to international transactions caused exports to show a 5.4 percent increase, compared with a 2.8 percent increase in the May estimate.

"Export growth is one of the few economic bright spots at the moment, but it is insufficient to offset domestically driven weakness," said Joshua Shapiro of MFR.

But imports fell just 0.7 percent in the first quarter compared with an earlier estimate of a 2.6 percent fall, according to the report.

Consumer spending, which makes up more than two thirds of the U.S. economy, was revised slightly higher as fresh data showed an increase in spending on medical care services. Consumer spending rose 1.1 percent in the first quarter, a tick higher than the 1.0 percent estimate last month.

Inflation, as measured by the Personal Consumption Expenditures price index, rose 3.6 percent in the first quarter, up slightly from the 3.5 percent rise in the prior estimate.

The Fed's preferred measure of inflation, the core PCE price index, which excludes food and energy prices, rose 2.3 percent in the quarter, up from the 2.1 percent rise estimated in May and above the central bank's comfort zone of 2.0 percent.

Chandler said this is consistent with the Fed's policy statement released on Wednesday, which said the "upside risks to inflation and inflation expectations have increased".

Over the past 12 months, the PCE price index and the core PCE price index have risen 3.4 percent and 2.0 percent respectively. Real final sales rose 0.9 percent in the first quarter, faster than the 0.7 percent gain in the prior estimate.

Corporate profits after taxes in the first quarter rose 2.5 percent, slower than the 3.8 percent estimated in May. The overall number reflects the impact of the credit crisis on financial companies. Profits at non-financial corporations rose 7.8 percent. Business investment rose 0.6 percent compared with a 0.2 percent fall in the earlier estimate.

The housing recession was only slightly less of a drag on the economy than had been thought previosuly, with residential fixed investment plunging 24.6 percent, compared with the prior estimate of a 25.5 percent drop.