US first-quarter GDP revised sharply higher; but consumer spending nearly stalls 

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WASHINGTON (Reuters) – The U.S. economy grew faster than previously estimated in the first quarter, but consumer spending almost stalled. 

Gross domestic product increased at an upwardly revised 2.1% annualized rate last quarter, the Commerce Department’s Bureau of Economic Analysis said in its third estimate of first-quarter GDP on Thursday. Growth was previously reported to have advanced at a 1.6% pace. Economists polled by Reuters had expected that GDP growth would be unrevised at a 1.6% rate. 

The economy grew at a 0.5% pace in the October-December quarter. The 0.5 percentage point upgrade to growth last quarter reflected a downward revision to imports, mostly consumer and capital goods. The boost to growth from lower imports was partially offset by a sharp downgrade to consumer spending, which accounts for more than two-thirds of the economy. 

Growth in consumer spending was slashed to a 0.5% rate from the previously reported 1.4% pace, reflecting downward revisions to outlays on services, including financial services and insurance as well as international travel. Part of the downward revisions to financial services was related to a stock market selloff last quarter. 

Spending appears to have picked up early in the second quarter, thanks to large tax refunds, which have partially mitigated a surge in gasoline prices stemming from the U.S.-led war with Iran. The average tax refund for the week ending May 8 was $3,276 compared to $2,939 during the week ending May 9, 2025, the last available data from the IRS showed. 

Overall economic activity is mostly being driven by artificial intelligence-related spending, with business investment in equipment increasing at a 15.8% rate, revised down from the previously estimated 17.2% pace. Outlays on intellectual property products rose at a 13.8% pace, revised up from the previously estimated 11.6% rate. 

Final sales to private domestic purchasers, which exclude government, trade and inventories, increased at a 1.7% rate. That was a downgrade from the previously estimated 2.4% growth pace. Profits from current production rose at a $74.4 billion rate last quarter, revised higher from the previously reported $40.4 billion pace. They surged at a $246.9 billion pace in the fourth quarter. 

When measured from the income side, the economy grew at a 1.2% rate in the January-March quarter. Gross domestic income was previously estimated to have increased at a 0.9% rate. It grew at a 1.6% pace in the fourth quarter. 

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, grew at a 1.7% rate. That was an upward revision from the previously estimated 1.3% growth pace. Gross domestic output grew at a 1.1% rate in the October-December quarter. 

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)