The U.S. economy grew at a sluggish 1.3% annual rate from January through March, the government said Thursday, in a downgrade from its earlier estimate, depicting that consumer spending rose but at a slower pace than previously thought.
The Commerce Department had previously estimated that the nation’s gross domestic product (GDP) – the total output of goods and services – expanded at a 1.6% rate last quarter.
The first quarter's GDP growth marked a sharp slowdown from the vigorous 3.4% rate in the final three months of 2023.
But last quarter's pullback was due mainly to two factors – a surge in imports and a reduction in business inventories – that tend to fluctuate from quarter to quarter. Thursday's report showed that imports subtracted more than 1 percentage point from last quarter's growth. A reduction in business inventories took off nearly half a percentage point.
Consumer spending, which fuels about 70% of economic growth, rose at a 2% annual rate, down from 2.5% in the first estimate and from 3%-plus rates in the previous two quarters. Spending on goods such as appliances and furniture fell at a 1.9% annual pace, the biggest such quarterly drop since 2021. But services spending rose at a healthy 3.9% clip, the most since mid-2021.
The U.S. economy has shown surprising durability since the Federal Reserve (Fed) started jacking up interest rates more than two years ago in its drive to tame the worst outbreak of inflation in four decades. The much higher borrowing costs that resulted were expected to trigger a recession. However, the economy has kept growing, and employers have kept hiring.
