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

[WASHINGTON] The US 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 per cent annualised rate last quarter, the Commerce Department’s ​Bureau of Economic Analysis said in its third estimate of first-quarter GDP on Thursday (Jun 25). Growth ‌was previously reported to have advanced at a 1.6 per cent pace. Economists polled by Reuters had expected that GDP growth would be unrevised at a 1.6 per cent rate.

The economy grew at a 0.5 per cent 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 per cent rate from the previously reported 1.4 per cent 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 oil prices stemming from the US-led war with Iran. The average tax refund ​for the week ending May 8 was US$3,276 compared with US$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 per cent rate, revised down from the previously estimated 17.2 per cent pace.

Outlays on intellectual property products rose at a 13.8 per cent pace, revised up from the previously estimated 11.6 per cent rate.

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

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

SEE ALSO

US consumer spending picks up as inflation hits three-year high

US core capital goods orders rebound sharply in May

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 per cent rate. That was an upward revision from the previously estimated 1.3 per cent growth pace. Gross ​domestic output grew at a 1.1 per cent rate in the October-December quarter. REUTERS