The U.S. economy contracted less in the first quarter of the year than previously estimated, according to a Commerce Department report released Wednesday.

This third and final reading showed it contracted at an annual rate of 0.2% rather than the 0.7% decline reported last month.

A better level of consumer spending than previously estimated accounted for much of the revision.

The decline in the first quarter compares to annual rate of a 2.1% contraction in the first quarter of 2014, which was followed by three quarters of positive performance.

Gregory Daco, economist at Oxford Economics, told the Wall Street Journal that “activity is bubbling beneath the surface," predicting that "faster wage growth and strong employment will support a private sector activity rebound in the coming quarters.”

Another economist is not so optimistic.

“The composition of growth early on is little changed, with declining business spending, a modest consumer, a positive but limited housing market, and weak export growth,” said Lindsey Piegza, chief economist at the investment banking firm Stifel. “Furthermore, this morning's revision to GDP does little to suggest any increased momentum for the second quarter as we await the current quarter's growth report.”

Despite the first quarter decline, she pointed out on Tuesday, Federal Reserve Governor Jerome Powell suggested the Fed could raise interest rates twice by the end of the year.

“Growth, however, must be substantially stronger in the remaining months of the year, which of course, is the Fed's median forecast,” Piegza said. “The Fed, however, has been wrong for years, consistently forecasting a robustly more positive growth rate than reality."

New home sales booming

Meantime, a separate Commerce Department report released Tuesday shows sales of newly built, single-family homes rose 2.2% to a seasonally adjusted annual rate of 546,000 units in May, the highest new-home sales rate since February 2008.

“Our builders are seeing motivated buyers and the release of pent-up housing demand,” said Tom Woods, chairman of the National Association of Home Builders and a home builder from Missouri. “However, builders are facing supply chain challenges, which is affecting the inventory of new homes.”

Regionally, home sales were mixed, rising 87.5% in the Northeast and 13.1% in the West. The Midwest registered a 5.7% decline and the South fell 4.3%.

“This month’s new-home sales report is consistent with other government data and rising builder confidence that indicate a continual recovery of the housing market,” said NAHB Chief Economist David Crowe. “The uptick in existing-home sales bodes well for builders, as it shows that the sellers are able to buy a new home.”