In a downgrade from its previous estimate, the government said today that the U.S. economy grew at a sluggish 1.3% annual pace from January through March, according to the Associated Press. Consumer spending rose, but at a slower pace than previously thought.
The Commerce Department had previously estimated that the nation’s gross domestic product — 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.
However, 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. Today’s report showed that imports subtracted more than one 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. Services spending rose at a healthy 3.9% clip, however, the most since mid-2021.
