The US economy contracted slightly less than initially estimated in the first quarter, while corporate profits rebounded, according to a government report on Friday that pointed to moderation in the recession. Perceptions that the worst of the 17-month old downturn was over pushed consumer confidence to its highest level in eight months in May. A report showing business activity in New York City expanded in May for the first time since January 2008 offered a further hint the recession was abating. Gross domestic product, which measures total goods and services output within US borders, dropped at a 5.7 percent annual rate in the first quarter, the Commerce Department said, less than the initial 6.1 percent estimate. The decline followed a 6.3 percent contraction in the fourth quarter. While the drop in activity was still steep, recent data have suggested the rate at which the economy was tumbling was easing and many economists expect growth to resume by year-end. Still, output has declined for three straight quarters for the first time since 1974-1975 in a contraction that is the deepest since at least the 1950s. Already, the recession is the longest since the Great Depression, although much less severe. “The recession is easing. The seBut the positive outlook for the economy was tainted somewhat by a report showing business activity in the country's Midwest unexpectedly fell sharply in April, likely reflecting troubles in the automotive sector. The report on GDP suggested sharp belt tightening by business was paying off as corporate profits after taxes increased 1.1 percent in the first quarter, the first increase in a year. In the fourth quarter, profits had plummeted 10.7 percent, the biggest decline since the start of 1994. Economic activity in the first quarter was dragged down by cutbacks in spending by businesses and the federal government and further retrenchment in homebuilding.
