Gross domestic product measures the value of all goods and services produced within the United States and is considered the best barometer of the country's economic fitness.



Fresher barometers, however, suggest the economy is shifting into a lower gear in the current quarter.

In a separate report, the Labor Department said that new claims filed for unemployment benefits last week rose by 4,000 to 313,000 - a bit more than economists were expecting.

Economists predict that economic growth in the April-to-June quarter probably slowed to a pace of around 2.5 percent to 3 percent. High energy prices and a more moderate housing market will play roles in the expected slowdown in overall economic activity.

If that turns out to be the case, the economy will have registered a seesaw-like pattern of growth in the last few quarters.

The opening quarter's energetic performance followed a lethargic showing in the closing quarter of 2005 when the economy grew by a feeble 1.7 percent pace. Fallout from the Gulf Coast hurricanes, including high energy prices, prompted belt tightening by people and businesses.

Consumers and businesses came roaring back in the first quarter, though, a main reason why the overall economy performed so well.

Consumers boosted spending in the first quarter at a 5.1 percent pace, compared to a meager 0.9 percent growth rate in the fourth quarter.

Businesses ramped up spending on equipment and software at a brisk 14.8 percent pace, up from a 5 percent growth rate in the prior quarter.

And, companies' profits continued to grow briskly. One measure of after-tax profits in the GDP report showed profits rose 13.8 percent in the first quarter. It was the second consecutive quarter of such strong growth.

The trade picture improved as imports didn't grow as much as previously estimated. That meant the trade deficit shaved only 0.24 percentage point from GDP, compared with a 0.55 percentage-point reduction calculated a month ago.

An inflation gauge closely watched by the Fed showed that core prices - excluding food and energy - rose 2 percent in the first quarter. That was the same as last month's estimate and was down from a 2.4 percent advance in the fourth quarter.

The inflation reading, however, was taken before oil prices shot up to a record high of $75.17 a barrel in late April. They are now hovering above $72 a barrel.

To fend off inflation, which has been creeping up, the Federal Reserve was expected to boost interest rates at the end of its two-day meeting Thursday. The Fed's goal is to rate interest rates enough to prevent inflation from taking off but not so much as to hurt economic activity.

Job growth lost momentum heading in the summer.

Employers boosted payrolls by just 75,000 in May, the fewest new jobs since October.

President Bush, coping with low job-approval ratings, hopes Goldman Sachs chief Henry Paulson - the man who has been confirmed to be the next treasury secretary - will breath new life in the administration's economic agenda.

Google's aim, said Eric E. Schmidt, the chief executive, is to make it easier and faster for people to buy products advertised on Google - thus attracting more advertisers.

"The goal here is to make it be one nanosecond from the time the customer decides to buy to the time the transaction is complete and the product is on the way," Mr. Schmidt said.

For consumers, this sort of service, often referred to as an online wallet, is hardly new. Microsoft, AOL and Yahoo have offered similar wallets, which proved to have limited appeal. While the PayPal service of eBay has attracted widespread use, it offers additional features like the ability to transfer money from checking accounts.

But for merchants, the service comes with a twist: Google will waive some or all of the transaction fees for companies that buy advertising from it. That may give the service a leg up on competitors like PayPal and several smaller companies that help online merchants accept credit cards.

It will also add another entry to the list of businesses that have been shaken up by Google's innovations, a list that already includes publishing, advertising and desktop software.

Google is charging merchants 20 cents plus 2 percent of the purchase price to process card transactions, less than most businesses pay for credit card processing. Banking industry executives say that credit card processors typically pay MasterCard and Visa a fee of 30 cents and 1.95 percent for every purchase, so Google will be subsidizing many transactions.

What is more, for every $1 a company spends on search advertising, Google will waive the fees on $10 worth of purchases. Factoring in the 2 percent fee, that represents a rebate of at least 20 percent of advertising spending.

Mr. Schmidt said the company was willing to lose money on transaction fees because it felt the package would increase advertising spending.

"The math works because we can have lower prices and higher volume," he said.

Google's decision to give free transaction processing to advertisers has the potential to disrupt its carefully cultivated electronic auction for ad placement. Google has worked hard to ensure that the auction treats all advertisers equally, sometimes to the dismay of big companies that are used to discounts for major purchases. It has not offered commissions to advertising agencies, as most media companies do.

Online merchants that do not want to use Google Checkout "might be a little peeved," said Kevin Lee, chief executive of Did-it.com, a search advertising agency. "They might say if you give that credit to some people for credit card processing, give it to me for something else."

Mr. Schmidt said Google had not considered this issue.

While Google's tactics may be seen as aggressive competition, the company is unlikely to run afoul of antitrust laws because it does not have a monopoly in the market.

Yahoo, the other main seller of advertising on search results, recently announced an alliance with eBay that among other things will encourage Yahoo advertisers to use PayPal for payment processing. PayPal will also be promoted as the online wallet for use on Yahoo services. Both companies declined to give financial details of the deal.

Google expects that most sites that use Google Checkout will also continue to use their existing method of processing credit cards and may accept PayPal as well.

Advertisements on Google.com from companies that accept Google Checkout will display a small image of a shopping cart. Clicking on the ad will take customers to the advertiser's Web site, as it does now. When customers decide to buy something, they will be offered the option to sign into Google Checkout and use the credit card and address information on file there. Customers that do not have accounts with Google will be encouraged to set them up.

Google may get several additional benefits from the checkout service. It will encourage more users to register and give it personal data, allowing Google to display advertising based on specific attributes of the viewer. More broadly, the data the company gets from transactions could help it improve the way it chooses which advertising to show to which users. Google says it does not currently plan to use transaction data in this way.

For merchants, one concern is whether Google's system, which is unfamiliar to users, will reduce the number of people who complete purchases on their sites, a measure known as the conversion rate.

"You have people in your most valuable area and suddenly you are switching them off your site to something no one has ever done before," said John Bresee, the president of Backcountry.com, an online seller of sporting goods that has been testing Google Checkout. "The cost will be stunningly high, if they are not great at what they do."

Mr. Bresee said Backcountry would have people watching the performance of Google Checkout around the clock.

"If they convert at the same rate, and the fees are lower, we will put up the biggest Google Checkout button you have ever seen," he said.

"The problem of conflict diamonds is practically over," Shmuel Schnitzer, outgoing president of the World Federation of Diamond Bourses (WFDB), told Reuters at the conference in Tel Aviv, among the world's top diamond cutting and trading centers.

"To show a film that will lead the public to think the situation is still the same is an injustice to our industry which has done so much," he said.

In a press release issued in February, Warner Bros. Pictures said The Blood Diamond, starring DiCaprio and
Jennifer Connelly, had started production in South Africa and Mozambique.

It did not say when it will be released and company officials could not be reached for comment. The unofficial IMDb movie database has the U.S. release date as January, 2007.

SHOPPING SEASON

The diamond industry fears the movie could hurt sales, especially if it hits theatres around the end of the year during the peak holiday shopping season.

"The people that the movie is trying to help could be hurt the most if it's left without an explanation since livelihoods in Africa depend on income from diamonds," said Eli Izhakoff, chairman and CEO of the World Diamond Council (WDC).

"It will hurt them with a downturn in sales. It can have an adverse effect on all of Africa," Izhakoff said.

He and other diamond industry officials say the situation has changed radically since a system of certification for rough diamonds known as the Kimberley Process was instituted in 2000.

The WDC is currently negotiating with the movie studio to add a scene at the end that would show the implementation of the Kimberley Process.

"They are hearing us and getting documentation and evidence," Izhakoff said. "When all is said and done, they want to be fair."

According to Schnitzer, conflict diamonds account for only 0.2 percent of the world's rough diamonds, down from 3-4 percent a few years ago, but industry and human rights groups differ on how much the practice persists.

Amnesty International, which launched a
Valentine's Day campaign against conflict diamonds, said that diamonds mined in rebel-held areas of West Africa's Ivory Coast were still reaching the international market.