The U.S. economy contracted slightly less than initially estimated in the first quarter, while corporate profits rebounded, according to a Commerce Department report on Friday that hinted that the recession was moderating.

Gross domestic product, which measures total goods and services output within U.S. borders, dropped at a 5.7 percent annual rate, the department said, less than the 6.1 percent estimated by the government last month.

The revisions were below market expectations for a 5.5 percent contraction for the January-March quarter.

Output has declined for three straight quarters for the first time since 1974-1975.

The Commerce Department's preliminary report also showed corporate profits after taxes increased 1.1 percent in the first quarter, the first increase in a year, after plummeting 10.7 percent in the fourth quarter. Analysts polled by Reuters had forecast profits dropping 7 percent.

Economic activity in the first quarter was dragged down by cutbacks in business, federal government, residential and nonresidential investment as well as a drop in exports.

Business inventories fell $91.4 billion after slipping by $25.8 billion in the fourth quarter. Last month, the Commerce Department estimated the drop in inventories at a record $103.7 billion in the first quarter. Inventories subtracted 2.34 percentage points from the overall GDP figure.

Excluding inventories, GDP contracted 3.4 percent, the department said.

Exports fell 28.7 percent, the largest decline since the fourth quarter of 1971, after dropping 23.6 percent in the fourth quarter. The drop in exports lopped off a record 3.86 percentage points from GDP.

Investment by businesses tumbled a record 36.9 percent in the first quarter, while residential investment dived 38.7 percent, the biggest decline since the second quarter of 1980.

Consumer spending, which accounts for over two-thirds of U.S. economic activity, rose 1.5 percent, but slower than the 2.2 percent rate estimated by the government last month. Spending had collapsed in the second half of last year.

Consumer spending was lifted by a 9.6 percent leap in the consumption of durable goods, the biggest advance since the first quarter of 2006. Motor vehicle output cut 1.36 percentage points from first-quarter economic activity, an improvement from the 2.01 percent subtraction in the fourth quarter.

(Reporting by Lucia Mutikani, Editing by Andrea Ricci)