WASHINGTON (AP) — The American economy expanded at a 1.4% annual pace from January through March, the slowest quarterly growth since spring 2022, the government said Thursday in a slight upgrade from its previous estimate. Consumer spending grew at just a 1.5% rate, down from an initial estimate of 2%, in a sign that high interest rates may be taking a toll on the economy.
The Commerce Department had previously estimated that the gross domestic product — the economy’s total output of goods and services — advanced at a 1.3% rate last quarter.
The first quarter’s GDP growth marked a sharp pullback from a strong 3.4% pace during the final three months of 2023. Still, Thursday’s report showed that the January-March slowdown was caused mainly by two factors — a surge in imports and a drop in business inventories — that can bounce around from quarter to quarter and don’t necessarily reflect the underlying health of the economy.
Imports shaved 0.82 percentage point off first-quarter growth. Lower inventories subtracted 0.42 percentage point.
Picking up the slack was business investment, which the government said rose at a 4.4% annual pace last quarter, up from its previous estimate of 3.2%. Higher investment in factories and other nonresidential buildings and in software and other types of intellectual property helped boost the increase.
After growing at a solid annual pace of more than 3% in the second half of 2023, consumer spending decelerated sharply last quarter. Spending on appliances, furniture and other goods fell by a 2.3% annual rate, while spending on travel, restaurant meals and other services rose at a 3.3% rate.
