The U.S. economy grew at an annual rate of 0.6 percent in the first quarter of 2007, the worst showing since the final quarter of 2002, the Commerce Department reported Thursday.

The growth rate in real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- was slower than the 1.3 percent pace originally estimated and the 2.5 percent pace in the final quarter of last year.

The new reading disappointed economists who had been expecting a 0.8 percent growth pace for the first three months.

The deceleration in real GDP growth in the first quarter primarily reflected an upturn in imports, downturns in exports and in federal government spending, and a deceleration in personal consumption expenditures for non-durable goods, the Commerce Department said.

In the first quarter, U.S. exports of goods and services fell by 0.6 percent after having surged 10.6 percent in the previous quarter, while imports of goods and services rose by 5.7 percent, compared to a drop of 2.6 percent in the final quarter of last year.

The trade deficit shaved a full percentage point from the GDP in the first quarter.

Meanwhile, businesses cut back on inventory investment in the first quarter. That lopped nearly a percentage point off first quarter GDP.

Federal government spending decreased by 3.9 percent in the first three months of this year, following an increase of 4.6 percent in the final quarter of last year.

The slump in housing market also restrained overall economic activity. Investment in home building dropped by 15.4 percent in the first quarter. But that was not as deep a cut as the 19.8 percent seen in the final quarter of last year.

Consumer spending, which accounts for two thirds of overall economic activity, rose by 4.4 percent in the first quarter, the most in a year. In the previous quarter, consumer spending was up 4.2 percent.

An inflation gauge tied to the GDP report and closely watched by the Federal Reserve showed that core prices, which exclude volatile food and energy, rose at a rate of 2.2 percent in the first quarter.

That was unchanged from its initial estimate but up from a 1.8 percent pace in the fourth quarter of 2006.

GDP is considered the best measure of the country's economic fitness. The economy will expand at a pace of 2.3 percent in the second quarter of this year, the National Association for Business Economics predicts.

Source: Xinhua