U.S. economy contracted by 1.5% in first quarter

The U.S. economy contracted by a 1.5% annual rate in the first quarter, according to new government figures. Corporate profits fell for the first time in five quarters.

The gross domestic product decline, or the scorecard of sorts for the economy, was revised from a previously estimated 1.4% dropoff.

The U.S. international trade deficit caused a lot of the weakness in the first quarter of GDP. Lower government spending and business inventories also contributed.

After a 0.7% gain in the previous three months, adjusted pretax corporate profits fell at a 2.3% rate in the first quarter.

Corporate profits are up 12.5% on a year-on-year basis.

Economists predict that GDP will go up in the second quarter to a 2% annual rate or a bit higher. Consumer spending was raised to a solid 3.1% increase from an initial 2.7%. Household outlays account for about 70% of U.S. economic activity.

Business investment was also robust, as was the other pillar of the economy. Residential housing was not quite as strong as initially reported.

Most of the other figures in the GDP report were little changed.

Most economic signposts show that the U.S. is expanding at a solid pace, but growth has slowed. The growth could slow down further with the Federal ReserveFederal Reserve raising interest rates.

The economy is on a stable base because of the strength of consumer spending and the red-hot labor market. How much inflation and rising interest rates can cause bigger cracks in the economy.

Market Reaction: The Dow Jones Industrial Average DJIA and S&P 500 SPX were set to open higher in Thursday trades.

After the Fed minutes from its early May meeting showed that the central bank might not raise interest rates quite as quickly as Wall Street had expected, stock prices went up on Wednesday.