US Q1 economic growth nudged higher by consumer spending, says Commerce Department

The US economy slowed less than feared in the first quarter due largely to a jump in consumer spending, providing a slightly more encouraging outlook for growth this year.

Gross domestic product increased at a 1.4 per cent annual rate instead of the 1.2 per cent reported last month, the Commerce Department said in its final assessment for the period on Thursday.

The reading was the worst since the second quarter of 2016 but above analysts’ expectations, easing fears the economy had been hobbled at the start of this year. The government had pegged first-quarter growth at a paltry 0.7 per cent in its first estimate in April.

“The upward revision occurred even with a downward revision to the inventory data, which has favourable implications for the adding up of second-quarter growth,” said Daniel Silver, an economist at JP Morgan.

Economists had expected GDP growth to be unrevised at 1.2 per cent in the first quarter. The economy tends to underperform in that period relative to the rest of the year due to perennial issues with the calculation of the data. The government has said it is working to resolve those issues.

First-quarter economic growth was boosted by an upward revision to consumer spending, which accounts for more than two-thirds of US economic activity. Consumer spending rose at a 1.1 per cent pace, the weakest reading since the second quarter of 2013 but almost double the 0.6 per cent reported last month.