The US economy grew much more slowly than previously thought in the first quarter while inflation was higher, a government report showed today.
The surprise downward revision to gross domestic product - which measures total output within US borders - cut growth to a 3.9 per cent annual rate in the first three months of 2004 from the 4.4 per cent reported a month ago and below the 4.1 per cent pace in the final quarter of last year.
Wall Street analysts had not expected the Commerce Department to change the GDP estimate. The department said the reduction in its final measure of first-quarter economic growth resulted from a sharp upward revision to imports - which subtract from GDP - and a downward revision to the amount consumers spent on bank services.
The government also ratcheted up a key measure of inflation, confirming an acceleration in price rises that has fuelled expectations the Federal Reserve will begin raising interest rates next week to head off inflation.