US personal spending revised sharply lower in Q1 data

US personal spending expanded in the first quarter at the weakest pace of the pandemic recovery, marking a surprise sharp downward revision that suggests an economy on weaker footing than previously thought.

Outlays on goods and services rose an annualised 1.8 per cent, compared with a 3.1 per cent pace in the previous estimate, according to Commerce Department data out on Wednesday (June 29). Overall gross domestic product was revised down slightly to a 1.6 per cent annualised decline in the first quarter.

Spending on both services and merchandise was revised lower. Within services, outlays for financial services, insurance and health care were marked down. Spending on goods was revised to an annualised 0.3 per cent decline from little changed, reflecting less robust spending on durables. 

“This is a case where GDP revisions alters the view of the first quarter,” said Alex Pelle, US economist at Mizuho Financial Group Inc. “Instead of accelerating in the first quarter versus the prior two quarters, consumption actually moderated.”

Outlays for non-durable goods shrank at a 3.7% rate in the January-March period. BLOOMBERG