U.S. services data suggest upward revision to first-quarter GDP

The Commerce Department's quarterly services survey, or QSS, showed consumption, including healthcare spending, increased at a faster clip than the government had assumed in its second estimate of gross domestic product published last month.

Economists said the data suggested first-quarter consumer spending could be bumped up by as much as four-tenths of a percentage point to a 2.2 percent annual rate when the government publishes its third GDP estimate on June 24.

"The survey data suggest better spending on healthcare services, in particular at outpatient care facilities and other medical service providers," said Jesse Hurwitz, an economist at Barclays in New York.

The QSS also suggested mild downward revisions to spending on intellectual property products.

That, together with revisions for construction spending, trade and wholesale inventory data, suggests first-quarter GDP could be revised to show it contracting at a pace of about 0.2 percent instead of the 0.7 percent pace of decline the government reported last month.

The QSS has been a significant source of revisions, especially last year as major provisions of President Barack Obama's signature 2010 healthcare law came into effect.

Unusually heavy snowfalls, a resurgent dollar, disruptions at West Coast ports and energy sector spending cuts in response to lower oil prices weighed on output in the first quarter.

A problem with the government model used to smooth the data for seasonal fluctuations has been blamed for the drop in GDP. Economists, including those at the San Francisco Federal Reserve Bank, 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 minimize it.

(Reporting by Lucia Mutikani; Editing by Paul Simao)