The U.S. economy grew at a slower pace in the first quarter than initially thought.

The U.S. economy grew more slowly in the first quarter than initially thought.

The Bureau of Economic Analysis' second estimate of first-quarter gross domestic product (GDP) showed the economy growing at an annualized rate of 1.3 percent during the period, down from 1.6 percent in its first estimate in April but in line with economists' estimates.

The BEA said its update to first-quarter growth “largely reflects a downward revision in consumer spending,” which grew 2% in the first quarter, down from 2.5% in the previous quarter.

This figure was significantly lower than fourth-quarter GDP, which was revised upward to 3.4%.

“While the weak growth numbers are depressing, private domestic sales to domestic buyers, the core of the economy, expanded at a healthy 2.5 percent annual rate, underscoring strong underlying momentum,” Nationwide financial markets economist Oren Krachikin wrote about the revised first-quarter GDP data released this morning.

The headline GDP slowdown comes at a time when inflation has proven stronger than expected and markets have become sensitive to indicators that the economy may be running hotter than the Federal Reserve would like. The worry is that overheated growth will lead to faster price increases.

Many forecasters don't believe the slowdown in economic growth in the first quarter is the start of a broader trend. Before Thursday's release, Goldman Sachs was forecasting growth at an annualized rate of 3.2% in the second quarter, while the Atlanta Fed's GDPNow forecasters are now predicting growth at an annualized rate of 3.5% in the second quarter.

“Monthly data since March have broadly suggested the economic expansion is continuing, albeit at a slower pace,” Klutchkin wrote. “GDP is expected to continue to grow this year, with healthy growth expected throughout 2024.”