First-Quarter Growth Comes Up Weak

War fears pushed consumer confidence to its lowest level in nine years during the quarter, which resulted in lower consumption. Now that the war's over, sentiment is ticking higher. The University of Michigan consumer sentiment index rose to 86 in late April from last month's reading of 77.6, according to a separate report released Friday.

"The improvement in sentiment is a positive sign that consumer spending will continue to grow," Thayer said. "This could lead to further strength in the stock market and businesses feeling its all right to invest again."

The economy has grown in fits and starts since the end of the recession in late 2001. In the first quarter, the growth rate was set back in part by delays in business spending decisions because of the war. Government spending was also postponed, which may have shifted some of the growth potential into the second quarter, economists said.

A third report Friday showed that new-home sales rose 7.3% in March to an annualized rate of 1 million units, above the consensus estimate of 905,000 units, partly due to better weather, economists say. But existing-home sales fell 5.3% in March to a rate of 5.53 million units from 5.86 million, below the 5.72 million forecast.