U.S. economic growth revised higher in first quarter

U.S. economic growth revised higher in first quarter.

People are seen inside shopping at a Costco Wholesale warehouse club in Westbury, New York, U.S., May 23, 2016.

U.S. economic growth slowed in the first quarter although not as sharply as initially thought, as a surge in home building and steady inventory accumulation partially offset the drag from a steep decline in business investment.

Gross domestic product rose at a 0.8 percent annual rate as opposed to the 0.5 percent pace reported last month, the Commerce Department said on Friday in its second GDP estimate for the January-March period.

That was the weakest growth since the first quarter of 2015. The economy grew at a rate of 1.4 percent in the fourth quarter.

But a sharp upward revision to income growth and a rebound in corporate profits in the first quarter brightened the picture. When measured from the income side, the economy grew at a 2.2 percent rate after expanding at a 1.9 percent pace in the fourth quarter.

Economists said strong income growth, together with signs the economy was picking up steam in the second quarter, could give the Federal Reserve the ammunition to raise interest rates as early as next month. The U.S. central bank increased rates in December for the first time in nearly a decade.

"This gives us more confidence that growth will hit its marks in the second quarter ... enough forward speed for the Fed to continue with its gradual pace of rate hikes," said Chris Rupkey, chief economist at MUFG Union Bank in New York.