US first quarter growth sharply revised down to 1.8%

WASHINGTON (Reuters) - US economic growth was more tepid than previously estimated in the first quarter, held back by a moderate pace of consumer spending, weak business investment and declining exports.

Gross domestic product expanded at a 1.8 per cent annual rate, the Commerce Department said in its final estimate on Wednesday.

Output was previously reported to have risen at a 2.4 per cent pace after a 0.4 per cent stall speed in the fourth quarter.

Economists polled by Reuters had expected first-quarter gross domestic product growth would be left unrevised at 2.4 per cent. When measured from the income side, the economy grew at a 2.5 per cent rate, slower than the fourth-quarter’s brisk 5.5 per cent pace.

Details of the report, which showed downward revisions to almost all growth categories, with the exception of home construction and government, could cast a shadow over the Federal Reserve’s fairly upbeat assessment of the economy last week.

Though the data is fairly backward looking, it comes as financial market conditions are tightening after Fed Chairman Ben Bernanke said last week the US central bank would likely begin to slow the pace of its bond-buying stimulus later this year and stop the programme in 2014.

Economists fear that could undercut growth, which has recently shown signs of picking up.

Consumer spending, which accounts for more than two-thirds of US economic activity, increased at a 2.6 per cent pace rather than 3.4 per cent. The revision largely reflected weak outlays on health care services.

Consumer spending grew at a 1.8 per cent rate in the fourth quarter of last year.

Exports, previously reported to have grown, actually contracted at a 1.1 per cent pace in the first quarter, cutting 0.15 percentage point from GDP growth. That likely reflects a slowdown in the global economy.

Business spending barely grew, with investment on nonresidential structures declining more sharply than previously reported. The drop in spending on nonresidential structures was the first in two years.

The pace of inventory accumulation was revised marginally down, adding more than half a percentage point to GDP growth. Excluding inventories, GDP grew at a 1.2 per cent rate, the slowest in two years.