US first-quarter GDP growth revised lower to 1.6 percent pace

U.S. economic growth was not as strong as initially thought in the first quarter, and momentum is set to slow further this quarter, with the war with Iran stoking inflation and squeezing household finances.

Gross domestic product increased at a 1.6 percent annualized rate in the first quarter, the Commerce Department’s Bureau of Economic Analysis said in its second estimate on Thursday. Growth was previously reported at a 2.0 percent pace. Economists polled by Reuters had expected the figure to remain unrevised at 2.0 percent.

The economy grew at a 0.5 percent pace in the fourth quarter. The downgrade to the first-quarter GDP estimate reflected downward revisions to inventory investment and consumer spending.

Overall economic activity is mostly being driven by artificial intelligence-related spending.

Growth in consumer spending, which accounts for more than two-thirds of the economy, was revised down to a 1.4 percent rate from the previously reported 1.6 percent pace. Hefty tax refunds provided some cushion to households from soaring gasoline prices.

Business spending on equipment increased at an unrevised 17.2 percent growth pace. Final sales to private domestic purchasers, which exclude government, trade and inventories, rose at a 2.4 percent pace, a slight downgrade from the previously estimated 2.5 percent growth rate.

Profits from current production rose at a US$40.4 billion rate in the first quarter, a sharp slowdown from the US$246.9 billion growth pace in the fourth quarter.

When measured from the income side, the economy grew at a 0.9 percent rate in the January-March quarter. Gross domestic income increased at a 1.6 percent pace in the fourth quarter.

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, grew at a 1.3 percent rate. Gross domestic output grew at a 1.1 percent rate in the October-December quarter.

Economists expect the conflict in the Middle East to weigh on economic growth from the second quarter onward.

Reuters

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