The US economy contracted slightly in the first quarter as it struggled with bad weather, a strong dollar, spending cuts in the energy sector and disruptions at West Coast ports. 

There are signs, however, that growth is accelerating in the second quarter as the temporary drag from unusually heavy snowfalls and the ports dispute fade. 

US retailers reported strong sales in May and employers stepped up hiring. Housing is also firming. 

The US Commerce Department said that GDP fell at a 0.2% annual rate in the January-March quarter instead of the 0.7% pace of contraction it reported last month. 

A stronger pace of consumer spending than previously estimated accounted for much of the upward revision. 

Consumer spending, which accounts for more than two thirds of US economic activity, was revised up to a 2.1% growth pace from the 1.8% rate reported last month. 

With personal savings increasing at a robust $720.2 billion pace, consumer spending could accelerate in the second quarter. 

While US export growth was revised higher, that was offset by an upward revision to imports, leaving a still-large deficit that subtracted almost 2 percentage points from GDP. 

The GDP revision was in line with economists' expectations.The US economy expanded at a 2.2% rate in the fourth quarter. 

But the first-quarter slump in output likely is not a true reflection of the economy's health. 

Economists, including those at the San Francisco Federal Reserve Bank, say a problem with the model the government uses to smooth the data for seasonal fluctuations also contributed to depressing the GDP number. 

They have argued the so-called seasonal adjustment is not fully stripping out seasonal patterns, leaving "residual" seasonality. 

The government said last month it was aware of the potential problem and was working to address it when in publishes annual GDP revisions in July. 

When measured from the income side, the US economy expanded at a 1.9% rate in the first quarter instead of the previously reported 1.4% pace.  

Economists estimate that the unusually heavy snowfalls in February sliced off at least one percentage point from growth. 
Estimates for spending on equipment were little changed. Business spending has been hurt by a strong dollar and lower energy prices. 

Businesses accumulated slightly more inventories than previously estimated in the first quarter, which could mean they have little incentive to keep on adding to stock in the current quarter.

The value of inventory accumulated in the first quarter was revised up to an increase of $99.5 billion from the $95 billion rise reported last month. 

After-tax corporate profits were a bit weaker in the first quarter than previously thought. Profits after tax with inventory valuation and capital consumption adjustments were revised to show a 8.8% decline instead of the 8.7% drop reported last month.