U.S. Economic Growth in First Quarter Was Milder Than Initial Reading

Economic growth slowed more sharply early this year than initially estimated, as consumers eased up on spending amid rising prices and high interest rates.

U.S. gross domestic product, adjusted for inflation, grew at a 1.3% annual rate in the first three months of the year, the Commerce Department said Thursday. That was down from 3.4% in the final quarter of 2023 and below the 1.6% growth rate reported last month in the government’s preliminary first-quarter estimate.

The data released Thursday reflects more complete data than the initial estimate, released just a month after the quarter ended. The government will release another revision next month.

The preliminary data fell short of forecasters’ expectations, but economists at the time were largely unconcerned, arguing that the headline GDP figure was skewed by big shifts in business inventories and international trade, components that often swing wildly from one quarter to the next. Measures of underlying demand were significantly stronger.

The revised data may be harder to dismiss. Consumer spending rose at a 2% annual rate — down from 3.3% in the fourth quarter, and 2.5% in the preliminary data for the last quarter — and measures of underlying demand were also revised down. An alternative measure of economic growth, based on income rather than spending, cooled to 1.5% in the first quarter, from 3.6% at the end of 2023.

Still, the new data does little to change the bigger picture: The economy has slowed but remains fundamentally sound, buoyed by consumer spending that remains resilient even after the latest revisions. That spending is supported by rising incomes and the result of a strong job market that features low unemployment and rising wages. There is still no sign that the recession that forecasters spent much of last year warning about is imminent.

Business investment, a sign of confidence in the economy, was actually revised up modestly in the latest data. Income growth, too, was revised up.

Inflation, however, remains stubborn. Consumer prices rose at a 3.3% annual rate in the first three months of the year, slightly slower than in the preliminary data but still well above the Federal Reserve’s long-run target of 2%.

In response, policymakers have raised interest rates to their highest level in decades and have said they will keep them there until inflation cools further. The modestly slower growth reflected in Thursday’s data is unlikely to change that approach.

The Fed will get a more up-to-date snapshot of the economy Friday, when the government releases data on inflation, income and spending in April.

This article originally appeared in The New York Times .