U.S. growth slows to 4-year low in first quarter

The Labor Department said the number of workers lining up to seek an initial week of jobless benefits fell by 13,000 last week to 313,000. That level was slightly lower than Wall Street expected and was taken as a sign of labor market strength.

But layoffs linked to auto retooling shutdowns typical in the summer months could skew the labor picture in coming weeks, making it harder to discern where the economy is heading.

"We won't have a clear idea of any change in the trend in claims until the end of July," said Ian Shepherdson, chief U.S. Economist at High Frequency Economics in Valhalla, New York.

While slightly stronger than the government's earlier reading, the increase in first quarter GDP was a tad weaker than the 0.8 percent growth economists were expecting.

The first quarter slowdown came as businesses sold off inventories even though consumer spending remained strong.

Businesses cut inventories at a $4.2 billion annual rate during the quarter, slightly less than the $4.5 billion annual rate in the previous estimate but still big enough to pull growth down during the quarter.

Imports increased at a 5.5 percent rate, slightly lower than the 5.7 percent estimate a month ago, but still a factor that weighed on growth. Exports, however advanced at a 0.7 percent rate, a reversal from the 0.6 percent contraction in the previous estimate.

Consumer spending, which fuels two-thirds of national economic activity, rose at a 4.2 percent rate, slightly lower than the 4.4 percent estimated a month ago but still a strong underpinning to keep the economy growing.

(Additional reporting by David McMahon in New York and Mark Felsenthal in Washington)