The U.S. economy grew at a slower rate than previously thought in the first three months of the year, expanding at just a 1.3% annual rate, according to revised government data.
The downward revision was mainly due to data showing that consumer spending growth was much slower than previously estimated.
That was the slowest growth in gross domestic product in nearly two years. The previous estimate put the economy’s growth rate at 1.6% in the first quarter.
The new figures show consumer spending grew at an annualized rate of 2 percent in the first quarter, below a previous forecast of 2.5 percent. In the second half of last year, consumer spending grew at more than 3 percent.
The slowdown in consumer spending is likely linked to inflation, which is squeezing household purchasing power, and stimulus checks and COVID-19-related economic restrictions have consumed much of the excess savings accumulated during the pandemic.
The biggest factors behind the economic slowdown since last year have been the widening trade deficit and slowing growth in business inventories. Companies tend to reduce their stocks when they expect sales to slow.
Trade and inventories are volatile components of GDP, often reversing direction from quarter to quarter outside of recessions.
The revised figures pose an added hurdle for the Biden administration’s efforts to convince Americans that it has managed the economy well. A majority of U.S. voters are unhappy with Biden’s economic policies, dragging down the president’s overall approval rating.
The size of the revisions to consumer spending and overall economic growth were larger than the median forecast, but downward revisions had been expected by economists.
The slowdown in growth is unlikely to prompt a change in monetary policy: Fed officials have said they need several months of data to show that inflation is moving sustainably back toward their 2% target.
