The American economy expanded at a much slower rate in the first quarter than originally posited as consumer spending and business investment, two important components of GDP were revised lower.
U.S. GDP grew at a 1.8% annual pace in the first three months of the year according to the Bureau of Economic Analysis of the Commerce Department today, in its third and last revision. Economists in the Bloomberg and Reuters polls had expected the 2.4% pace of the first two revisions to remain unchanged.
Growth in personal consumption, which accounts for about 70% of the economy, was revised down to 2.6% from 3.4%. Business investment was also downgraded with a reading of 0.4% in the first quarter, a far cry from the 2.2% original estimate. The housing sector remained strong, with investment improving at an upwardly revised 14%.
Government spending continued to fall, though at an unchanged rate. Federal expenditures declined 8.7% annualized and state and local government expended 2.1% less. Exports were less than the initial estimates though lower imports reduced the economic effects.
The Federal Reserve said last week that it expected the economy to grow 2.3% to 2.6% this year a reductions from its previous estimate of 2.3% to 2.8%. The forecast for 2014 GDP was raised to 3-3.5% from 2.9-3.4%.
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