The U.S. economy got off to an even slower start of 2018 than the government estimates previously stated, thanks largely to a big pullback in consumer spending.
Gross Domestic Product expanded at a seasonally-adjusted annual rate of 2 percent in the first quarter, the Commerce Department said Thursday. Earlier, the government had estimated the economy grew at 2.2 percent.
The downward pressure on growth was largely due to consumers spending less than previously estimated on services. Spending on health-care and spending on financial services were weaker than indicated in earlier reports.
Overall, Consumer spending expanded at a sluggish 0.9 percent annual pace in the first three months of the year. That is far lower than the robust expansions in consumer spending reported in the third and fourth quarters of last year, when a combination of post-hurricane spending and strong holiday sales boosted GDP. It’s not clear whether the pullback in spending was due to consumers simply lacking an impetus to spend, fears about economic growth, or perhaps even the unusually harsh winter.
There were some positive notes in the revised GDP report. Business investment, including spending on computers and research and development, was stronger than expected. This is likely due, in part, to changes to the tax code that make for a better environment for business investment.
The second quarter looks much stronger. By many estimates, the economy is growing near or above a 4 percent annualized rate, something that has only happened in four quarters since the end of last recession.